Research and Development Tax relief – what exactly is it?
Here’s a very (very) short video if you would just like a snapshot, or read on below for more detail:
How is research and development tax relief calculated?
How can you calculate the research and development tax relief as 230%?
SME R&D relief allows companies to:
- deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction
- claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss
Which sectors can apply for research and development tax relief?
The criteria to qualify for R&D tax relief has always been purposefully broad, in order that any company, regardless of sector, which is taking a risk by attempting to ‘resolve scientific or technological uncertainties’ may make a claim.
Costs associated with the qualifying projects which can be claimed include:
- staff costs (including expenses, pensions and NICs)
- Subcontractor or freelancer costs
- Materials and consumables used or transformed by the process
- Certain types of software
- Payments relating to clinical trials
How easy is it to make a claim?
It’s really very simple – you enter the total qualifying expenditure in the correct place on your full Company Tax Return form.
And you can even backdate a claim as much as two years after the end of the accounting period.
However, HMRC has currently halted the payment of research and development (R&D) tax credits while it investigates irregularities in claims.
Due no doubt in part to the ease of making a claim, and the limited checking of such claims, it would appear that a large number of rogue ‘R&D consultants’ have been targeting small businesses and making inappropriate or false claims, specifically by loss making firms: