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Research and Development Tax Reliefs

Companies that work on innovative projects in science and technology can seek support from Research and Development tax reliefs (R&D). A wide range of companies can claim Research and Development tax reliefs to put towards research or to develop an advance in their specific field, even if the project is unsuccessful.

What Projects count?

To qualify for R&D relief the work must be part of a specific project.

The work must be to make a gain or advance in either science or technology.

The project must relate to the company’s trade, although this can be one that already exists or one that is due to be started.

How to get R&D

To claim R&D you need to explain how the project has:

  • Looked for an advance in science and technology
  • Had to overcome uncertainty
  • Tried to overcome this uncertainty
  • Could not be easily worked out by a professional in the field

Small and medium sized companies could claim R&D relief if:

They have less than 500 staff or a turnover of less than 100 million Euros (roughly 86 million GBP) the SME R&D relief would allow eligible SME’s to deduct an extra 130% of their qualifying costs from their yearly profit. This added to the normal 100% deduction makes a 230% deduction. Eligible SME’s can also claim a tax credit if the company is loss making. Read HMRC’s guide on Making R&D easier for small companies here

R&D expenditure credit was introduced in April 2016 and replaced the large company scheme. This can also be claimed by smaller companies contracted to do R&D work by a large company.

Costs of the project can be claimed from the date work on the uncertainty starts until the advance is discovered/ developed or until the project is stopped.

The claimable costs are:

  • Staff costs
  • Subcontractor cost
  • Consumable costs

Costs that cannot be claimed for:

  • Production and distribution of goods and services
  • Capital expenditure
  • Cost of land
  • Cost of patents and trademarks
  • Rent or rates

Find out how to calculate and claim R&D expenditure here

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