Companies missing out on R&D tax relief

Companies missing out on R&D tax relief

Currently only around 10% of eligible businesses are claiming Research and Development (R&D) tax relief with many others failing to apply for their full entitlement.

R&D tax relief is currently available to SMEs providing an enhanced tax deduction for the costs of qualifying R&D projects. This can only be claimed if a business is liable for corporation tax.

What qualifies as an R&D project?

A business can apply for R&D tax relief if they’re undertaking an R&D project – this can be a new product or changes/ improvements to an existing process.

According to HMRC, R&D projects are summarised as ‘projects which seek to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty – and not simply an advance in its own state of knowledge or capability’.

Relief available

Small or medium-sized enterprise scheme

The current tax relief on allowable R&D costs is 230% – this means for every £100 of qualifying costs, your company can lower its profits subject to corporation tax by an extra £130 in addition to the £100 spent.

Research and Development Expenditure Credit scheme

If any of the expenditure on R&D has been met by funding (such as a grant) then relief may be available at 11% under the Research and Development Expenditure Credit scheme.  

Benefits 

SMEs can claim the tax relief if they have:

  • less than 500 employees
  • an annual turnover under £100 million
  • a balance sheet under £86 million.

If your business falls into this category, the amount you can claim back as tax credit (if you choose to surrender your losses to HMRC in return for a cash credit) can be as much as 33.35p for every £1 spent on qualifying R&D. 

Making a claim

If you decide to make a claim for R&D tax relief, it should be included on your company’s tax return.

The deadline for submitting a claim is 2 years from the end of the accounting period in which costs were included.

For more guidance on qualifying for R&D tax relief visit the HMRC website or speak to a member of the Lentells team for further advice.

 

Chard

Jo Fursman jo.fursman@lentells.co.uk 01460 64441

Seaton

Mike Griffiths michael.griffiths@lentells.co.uk 01297 20584

Taunton

Adrian Stallard adrian.stallard@lentells.co.uk