R&D Tax Credits made simple

R&D tax credits are a government incentive designed to boost innovation across multiple industries. It’s the perfect opportunity to reduce your corporation tax bill or get a cash injection from HMRC for the hours spent on Research & Development.

Our Year End accounting service seamlessly syncs with our cloud-based bookkeeping and R&D Tax services. That means we'll already know your numbers from the ground up and can quickly identify expenses and maximise your savings.

You can claim relief on costs that have been expensed through the Profit & Loss account and in certain circumstances you can also claim capitalised expenditure (providing that the assets purchased have been classified as Intangible Assets).

The main areas of costs that can be claimed are:

- Staff costs (incl. gross pay, employer's NI, reimbursed expenses and employer's pension contributions)
- Agency workers (externally provided workers)
- Subcontractors/freelancers
- Software license costs
- Consumable items (heat, light and power, materials and equipment used or transformed by the R&D process)
- Payments to the subjects of clinical trials.

For SMEs claiming R&D Tax Credits the accounting treatment is straightforward: your R&D Tax Credit is not taxable income. It is a below-the-line benefit and will be shown in your income statement (also known as your profit-and-loss account) either as a Corporation Tax reduction or a credit.

A business can make a claim for R&D tax relief, but must notify HMRC of it's intention to claim 6 months after the end of the accounting period if you are a new claimant. The claim can be made in a company tax return or in an amendment to it.

The credit rates are changing. Pre-April 2023: For profitable SMEs, you should expect approximately 24.7% of your R&D costs refunded. For SMEs operating at a loss, you can expect to receive 33% back. Post-April 2023: Profitable SME's would expect 21.5%, breakeven SMEs would get 8.6%, loss making SMEs would expect to get up to 18.6%.

To claim R&D tax credits, a business must engage in qualifying R&D activities aimed at advancing science or technology. Eligible activities include developing new processes, products, or services, and overcoming scientific or technological uncertainties. The business must be liable for corporation tax in the UK and have spent money on eligible R&D projects. Additionally, the business should have maintained appropriate records and documentation to support its R&D tax credit claim.

To successfully claim R&D tax credits, follow these steps: first, ensure eligibility by meeting the criteria. Next, engage in onboarding with our experts for an information call. Lastly, the experts will review your R&D activities thoroughly before proceeding with the claim process. This meticulous approach guarantees a seamless experience and maximises your potential benefits. Trust our specialists to navigate you through the complexities of R&D tax credits and secure the deserved financial incentives for your innovative endeavours.

Be wary of underestimating or overestimating your R&D spending; ensure all qualifying activities are included but they must meet the criteria. Avoid lack of documentation and inaccuracies that may impact your claim. Don't overlook the importance of meeting eligibility criteria. Stay informed on changes in regulations. We can work with you on these things diligently, simply reach out to our team.

A business must inform HMRC of its intention to claim R&D tax relief within 6 months after the end of the accounting period if it is a new claimant. You can simply reach out to our team if you need any support.