Research and Development
What is Research and Development (R&D) Tax Relief
This is a tax relief designed to support companies that are working to innovate in science and technology. It is designed to encourage and boost innovation and scientific advances in the UK economy.
Your Research and Development (R&D) project may develop a new process, product or service or improve an existing one. As long as the work being carried out seeks an advance, most companies and sectors can qualify for Research and Development (R&D) tax relief. You can claim even if the project fails or your company doesn’t have taxable profits.
What are the conditions?
To be able to claim, your Research and Development (R&D) project needs to meet HMRC’s definition. The work being undertaken should be for the purpose of making an advance in science technology; it cannot be an advance in social sciences (such as economics, Psychology, etc.) or any other fields.
You have to show that R&D project relates either to the company’s existing trade or that you will be starting a trade which is based on your Research and Development (R&D) project.
As part of the process, you are required to submit a Research and Development (R&D) report to HMRC which needs to meet certain criteria.
The report should demonstrate how your Research and Development (R&D) project is aimed at creating an advance in your field. It cannot be technology that has already existed in other sectors and you are trying to implement it within your sector. You also have to demonstrate that the advance is for your entire sector and not just your business.
Where the advance was already developed previously, HMRC will still consider it as long as it was not publicly known or available previously.
The report should also explain why it is difficult to work out the advance that you are aiming for. This can usually be shown by the fact that you are employing specialist help for your Research and Development (R&D) project and that previous attempts of carrying a similar project have failed.
Your report should also be able to explain the uncertainties with your Research and Development (R&D) project and the steps you have taken to overcome them. Uncertainty can be demonstrated by the fact that experts within the field are unsure of the projects outcome and cannot be certain whether it will succeed.
You need to show that you have employed expert help and have carried out rigorous testing and analysis as a way of overcoming the uncertainty.
How does the relief work?
There are different types of Research and Development (R&D) reliefs available which are dependent on various factors.
The one most commonly used is Small and Medium sized R&D relief. With this relief you can either:
– Deduct an extra 130% of the R&D cost from their profits in addition to the 100% normally claimed which would add up to a total deduction of 230%; or
– If the company is making losses, you can surrender these losses and claim tax credits up to 14.5% of your losses
How can we help
Churchill Tax Advisers specialises in Research and Development (R&D) relief claims and has helped a large number of clients with their claims.
Our team consist of chartered tax advisors, senior Ex-HMRC inspectors tax barristers and chartered accountants with a combined experience of over 140 years. No matter how complex the claim is, our team has the experience and expertise to handle the whole process for you.
If you are looking to make a claim or need more information, please get in touch with one of our experienced colleagues for a confidential discussion on 0203 500 0959.