Research & Development (R&D) tax relief can help fund your company, by reducing your tax bill or providing you with cash.

Over 4,500 small and medium-sized (SME) companies are claiming more than £250m each year in R&D tax relief from HM Revenue & Customs (HMRC).The tax definition of R&D is very broad and any company that employs scientists, engineers, or software developers should be considering if they are eligible for this benefit.

The benefit comes in one of a number of ways:

1. For profitable companies owing money to HMRC, a reduction in the amount of money owed
2. For profitable companies who don't owe money to HMRC, the enhanced relief means a reduction in the amount of tax payable
3. For loss-making companies there is a cash credit available from HMRC.

We have successfully helped companies claim millions of pounds of benefit, and we provide 3 levels of help and support.

1. Free information on this web site - there are many free help articles available if you would like to learn more about the scheme or if you need help in making a claim.
2. We provide training packs for companies that want to prepare their own R&D claim and would like the many hundreds of pages of legislation and HMRC guidance summarised in a practical guide with worked examples.
3. We provide full assistance for companies wanting to make an R&D claim by providing help on a no-win no-fee basis. We ensure that your R&D claim is maximised, that your claim is submitted with expert documentation supporting its validity under the legislation and that any potential pitfalls with HMRC are avoided (for example over-claiming is likely to result in a 30% penalty from HMRC) Our 100% record of success and a host of real verifiable references available on request speak for themselves.

Frequently Asked Questions on claiming R&D Tax Credits

What Can be claimed?

• Direct staff costs, consumables such as prototype parts, heat, light, water, power, software licenses for R&D, contract workers and subcontract costs under certain circumstances.

Does the R&D have to be successful?

• No, it's the attempt which counts.

Does the R&D have to be for something completely new?

• No, it can also be for an appreciable improvement to something that already exists. You do not need to be the first people in the world to be doing this providing that the solution is not either publicly avaiable or readily deducible.

What are the requirements for an R&D project to qualify?

• See our handy video

Can I claim for other costs of R&D such as recruitment, staff redundancy payments

• No, there are a category of costs called Qualifying Indirect Activities but these are limited to a small number of specific tasks and must be performed by staff who are directly and actively involved in the R&D.

Can any company claim a payable credit (cashback)?

• No, this is specific to the SME scheme for loss-making companies. However, if you do not qualify for a cash-back you can still get a refund of tax paid previously or a reduction in a forthcoming tax bill. It's still valuable funding for your business and can sometimes work out as more valuable than the cashback.

Are there caps on the credit (cashback)?

• Yes, it is limited by both trading losses and PAYE & NI in the period

Can we claim R&D relief for a breakthrough we have made in marketing?

• No, the R&D needs to be in any field of science or technology, excluding the social sciences.

What about multi-disciplinary sciences such as ergonomics or cognitive science?

• We have successfully assisted companies in claiming in these areas but they are more complex. Contact us for more information.

Do we need to have a time tracking system in order to track our R&D?

• No; it is normal for small companies not to have specialist tracking for R&D or to keep detailed records given the overhead that this would incur. In such cases, which are very common, we use our expertise and experience to help our clients produce the necessary supporting documentation based on whatever evidence is available.  

Who has to make the assessments about what qualifies as R&D?

• The people actually performing the R&D. There is no surer way to have a claim rejected than by not involving the technical staff in the R&D claims process and HMRC will want to speak to them in the event of a meeting. As well as fully involving technical staff in any claim, part of what we provide our clients is attending meetings with HMRC, negotiating with them if needed, and ensuring that both the finance and technical staff are fully briefed beforehand.

How do we make an R&D claim?

• In theory, all it needs is a number on the CT600 corporation tax return or an amendment filed for a previous accounting period. The reality is that if this is not backed up by relevant substantiating documentation which shows what is being claimed for and how and why it meets the tax legislation, then an HMRC enquiry is likely to follow.

What could it cost me if I make a mistake in my R&D claim?

R&D claims are treated like any other part of corporation tax and the new 2010 penalty regime applies.

• if a penalty arises because of a lack of reasonable care, the penalty will be between 0 and 30 per cent of the extra tax due
• if the error is deliberate, the penalty will be between 20 and 70 per cent of the extra tax due
• if the error is deliberate and concealed, the penalty will be between 30 and 70 per cent of the extra tax due

Making a mistake about what qualifies is almost always treated as not taking reasonable care.

Common R&D Tax Relief Misconceptions:

• Software R&D Claims cannot be for developing business applications
  • INCORRECT: we specialise in R&D tax credit claims for software companies and have expert software architecture expertise that we utilise to ensure any R&D claim is fully maximised. We have successfully helped companies claim for numerous software projects, ranging from CRM, to flash-based websites to IVR systems. The key to software R&D tax credit claims is understanding that the eligibility criteria are entirely technology based and not based on features and functionality. On many occasions, software claims that appear not to qualify on first glance can in fact qualify when the development frameworks, algorithms, protocols, packages and components are investigated in more detail. We have also helped companies claim for ancillary staff, such as graphic designers and sound artists whose work at first glance may appear not to be eligible.

• R&D tax relief is only for bleeding-edge lab work
  • INCORRECT: Most companies' R&D is actually development work in a real-world environment. Most of the claims we handle are for real-world development and eligibility can still occur once an item is already in production.

• R&D tax relief only applies to the 2-3 key problem-solvers in the company
  • INCORRECT: The  tax definition of R&D is broad enough that potentially anyone who contributes to getting the product working in the real-world environment has the potential to be included in your claim

• R&D tax relief is just not worthwhile
  • INCORRECT: If you are a loss-making company with up to 500 employees, you could be receiving a cheque from HMRC for a quarter of your annual salary bill. If you are profitable then you can make a 200% tax deduction on these costs to offset against future profits. If you are a larger company and in profit then you can make a 130% deduction of these R&D costs against future profits.