The benefits of claiming R&D tax credits
Businesses large and small are capable of overlooking small details every now and then, leading to them missing out on the odd benefit. One area which has been particularly common for oversight has been the advantages associated to research and development tax credits.
Introduced by the UK government back in 2000, R&D tax credits act as a form of ‘reward’ for those businesses engaging in research and development activity. With the government’s desire to keep UK industry at the forefront of innovation, the introduction of these tax credit benefits have thus enabled companies to continue their pioneering work knowing that there will be some form of acknowledgement of its importance, regardless of the success of any project.
So, how do R&D tax credits work?
When it comes to R&D tax credits, the opportunity to make a successful claim is dependent on many factors, notably the status of your business and ensuring your work fulfils the necessary criteria to qualify.
Beginning with the status of your business, there are two schemes available: for businesses with fewer than 500 employees and turnover of less than €100m, applying through the regular R&D scheme is available; for companies with greater turnover and staffing levels, however, the slightly less generous Research and Development Expenditure Credit (RDEC) is available.
Regardless of the category into which your business falls, the eligibility criteria for your R&D work is the same. The somewhat vague criteria are defined by HMRC as being able to show that your work:
- looked for an advance in science and technology
- had to overcome uncertainty
- overcame this uncertainty
- could not easily be worked out by a professional in the field
While it may sound straightforward to be able to detail this, the reality is that processing a successful application is far from simple. As such, many businesses look to invest in providers of R&D tax solutions in order to help them complete the necessary paperwork and complete the documentation that is essential for a claim to be successful.
How much can we claim?
The big question when it comes to R&D tax credits, of course, relates to how much your claim may be worth. On average, claims for SMEs are worth approximately £60,000, while those on the RDEC scheme are a staggering £350,000. These figures depend on the extent of work conducted and those expenses you can claim.
Among those expenses that make up an R&D tax credit claim, it will often be staffing costs – including subcontractor costs, pension contributions, and National Insurance payments – that are the most significant. That said, you can also claim for consumable items such as materials and utilities that featured during the work, so keeping detailed records of all relevant expenditure is of the utmost importance.
A successful claim for R&D tax credits can benefit your business to the tune of thousands of pounds. As such, making sure you don’t miss out on any potential benefits is vital. Talk to experienced R&D tax experts today to learn more about making a claim and recovering some of the expenditure you make on key R&D work.