Can you recognise qualifying R&D in your Company?
- you may be surprised how many companies can’t
- don’t be one of them!
What are R&D Tax Credits?
The Government’s R&D Tax Credit Scheme was introduced for Small and Medium Enterprises in April 2000 and for large companies one year later (SMEs for R&D purposes are companies with under 500 employees and either less than 100 million Euros turnover or a balance sheet value of less than 86 million Euros).
The R&D Tax Credit scheme applies to Limited Companies:
R&D costs can be offset against UK Corporation Tax.
If there are no profits a Cash Credit is available…
…all subject to qualifying conditions being met.
Since April 2012 qualifying R&D costs can be enhanced by an additional 125%, and since April 2015 130% which means that:
- if profitable you can reduce your corporation tax by 26% of your R&D costs – e.g. by £2,600 for every £10,000 spent
- or if you made a tradnig loss the benefit is between 18% and 33% of your R&D costs
- i.e. loss making companies stand to get up to 33 pence in cash for every £1 spent on R&D.
Prior to 9th December 2009, in order to qualify a small or medium enterprise had to own the resulting intellectual property from R&D expenditure – this no longer applies.
Qualifying costs include:
- internal labour costs (often the largest cost)
- a proportion of sub-contracted R&D work
- energy, consumables and materials used.
Retrospective claims can be made going back two years based on a company’s financial year end – i.e. during the current year you can claim for the last two completed years.
Here are some examples of qualifying industries and activities
The above is by no means an exhaustive list – there is no company or industry that is disqualified because of the sector they are in – any company can potentially qualify.
Email us to check if you qualify.
Posted by Linda Eziquiel R&D tax credit specialist.