What are R&D tax credits?

The Research and Development Tax Credit scheme is an initiative by the UK Government designed to reward small and medium sized UK enterprises investing in innovation and R&D. Companies can reduce their tax bill or claim payable cash credits as a proportion of their R&D expenditure.

They are a valuable source of cash for businesses to invest in developing their research and development activities, new staff recruitment and ultimate growth of the enterprises. R&D tax credits are the biggest single funding mechanism provided by Government.

If you are an SME you could receive a tax relief of up to 43.7p per £1 spent on qualifying R&D expenditure. If the company is loss making, you could still claim a cash grant of up to 33.35p per £1 spent on qualifying R&D expenditure.

How does R&D tax relief work?

If your company develops new products, processes or services or enhances existing ones, then you could be eligible for R&D tax relief.

There is a very wide scope for R&D tax credits and many business owners don’t think they’ll qualify, when they do! So don’t assume you won’t qualify for R&D tax relief, contact us and we’ll give you clear advice on your ability to claim.

Consider an engineering consulting company with 2 employees (including director), with a profit of £75,000. The company’s corporation tax liability (@19%) payable before the R&D claim is £14,250.

Out of its total expenses, business incurred £25,000 that qualified as R&D expenditure eligible for the small or medium sized enterprise (SME) R&D tax relief. Under the SME relief the qualifying R&D expenditure is enhanced by 230% and the relief works as follows:

The company can save an additional £6,080 in Corporation Tax and received a relief of 43.7 pence per £1 of expenditure on R&D.

If the company was loss making company, it could surrender the loss to HMRC in exchange of 14.5% credit against the total enhanced expenditure. This means company could receive a cash grant of £8,337, which is equal to 33p per £1 of R&D expenditure.

With dns, With dns, you just have to contact us and then we’ll send you a questionnaire to complete and then you’re done! Our R&D tax experts will contact you and make the whole process easy and ensure you claim maximum R&D tax relief.

Who qualifies for R&D tax credits?

R&D tax relief can be available to businesses in all sectors. So don’t assume you don’t qualify. Book a call back today to get advice.

How much can you claim on R&D tax credits?

The government incentives to encourage investment in research and development are very generous and allow up to 33.35% of a company’s R&D spend to be recovered as a cash repayment or a reduction in Corporation Tax

Is my business eligible for R&D tax credits?

• You should have a limited company in the UK which is subject to corporation tax.
• You need to be carrying out qualifying research and development activities.
• You have spent money on R&D activity.

The benefits of R&D tax credits

R&D tax relief can transform your business by providing cash into your business to aid future growth or future research & development projects. They can give you an immediate source of cash to invest back into your business.