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Director – Chief Technical Report Writing

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Chief of Finance and Accounting

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Frequently Asked Questions
What qualifies as R&D?

R&D stands for Research and Development, and qualifying activities typically include projects that seek to achieve an advance in science or technology. To qualify for R&D tax credits, your project must:

Address a Scientific or Technological Uncertainty This means the outcome of the project was unknown and couldn’t be easily deduced by a professional in the field.

Seek an Advance The project aims to make an advancement in the field, beyond mere cosmetic improvements or standard upgrades.

Involve Technical Challenges Overcoming these challenges should require a systematic investigation, experimentation or analysis.
Examples of qualifying activities include developing new products, processes or services, improving existing ones, or creating new software or IT solutions.

The amount you can claim depends on the R&D scheme applicable to your business:

SME R&D Tax Relief For small and medium-sized enterprises, you can claim up to 230% of your qualifying R&D costs. This means for every £100 spent on R&D, you can deduct £230 from your taxable profits. If the company is loss-making, you can opt for a payable credit worth up to 14.5% of the surrenderable loss. This scheme is merging with the Research & Development Expenditure Credit (RDEC) scheme and can only be used for claims with year ends before 1st April 2024.

RDEC Scheme For large companies, the (RDEC) scheme offers a credit of 13% of your qualifying R&D expenditure. This credit is taxable but can be used to offset your tax liability or result in a cash payment if the company is not in profit.

Merged Scheme (Accounting periods beginning on/after 1st April 2024) The government has announced changes to merge the SME and RDEC schemes into a single R&D relief scheme. This unified scheme aims to simplify the process and ensure consistency in how R&D activities are supported across all businesses. While the specific details and rates are subject to final confirmation, the merged scheme is expected to streamline the benefits and possibly offer new rates for R&D tax relief. It’s advisable to stay updated with HMRC announcements or consult with an R&D tax specialist such as us to understand how the new scheme may impact your claims.

Examples of potential claims under the different schemes

  • SME Example

    • Qualifying R&D Expenditure £100,000

    • Enhanced Deduction (230%) £230,000

    • Tax Saving (at 19% Corporation Tax Rate) £43,700

    • Payable Credit (for loss-making companies) Up to £33,350 (14.5% of £230,000 surrenderable loss pre April 2023 10.5% post April 2023)

  • RDEC Example

    • Qualifying R&D Expenditure £100,000

    • RDEC Rate 13%

    • Tax Credit £13,000 (subject to tax)

  • Merged Scheme Example (Hypothetical, subject to official rates):

    • Qualifying R&D Expenditure £100,000

    • Unified Relief Rate Let’s assume 15% (hypothetical for illustration)

    • Tax Credit £15,000 (subject to tax or direct cash benefit depending on the company’s tax position)

These examples provide a general idea of potential benefits under different schemes. For precise calculations and to maximize your claim, it’s best to consult with an R&D tax specialist who can tailor the claim to your specific circumstances and ensure compliance with the latest regulations.

The duration of the R&D tax credit claim process can vary:

Preparation: Collecting information and preparing the claim typically takes 2 – 6 weeks, depending on the complexity of the projects and the availability of documentation.

Submission: Once prepared, the claim is submitted to HMRC as part of your company’s corporation tax return.

Processing by HMRC: HMRC aims to process R&D claims within 28 days for SME claims and slightly longer for RDEC claims. However, the entire process from submission to receiving the benefit can take 2 – 3 months.

If HMRC raises questions or requires further information about your claim:

Initial Review: HMRC may request additional documentation or clarification regarding the claimed activities and expenditures.

Response: We will help you prepare and submit a comprehensive response to address HMRC’s queries.

Outcome: Once HMRC is satisfied with the explanations and evidence provided, they will process your claim. If adjustments are needed, we will work with HMRC to resolve any issues.

Our team provides full support throughout this process, ensuring that your claim is robust and well-documented to minimise the risk of queries.

Yes, you can claim R&D tax credits for past projects. You can typically claim for the last two accounting periods, for example:

  • If your company has a December year-end, you can claim for projects completed in the year ending December 2022 and December 2023.

  • If your accounting period is shorter or longer than 12 months, the time frame for claiming might differ.

It’s essential to review past projects and timelines comprehensively to ensure all qualifying activities and expenditures are captured accurately.