Research and Development

(R&D)

Tax Credits

A man in a suit pointing at a laptop screen and explaining something to a man sitting next to him. Both men look happy with what is being discussed.

Research and Development (R&D) Tax Credits were designed by the government to promote more projects to promote innovation and growth in Small to Medium Sized Enterprises (SME) businesses by offering the tax credit to those undertaking specific, eligible development.

They have been offering this cash injection since 2000 and the credit can be worth up to 27% of the expenditure of the project. R&D Tax Credits aim to benefit companies running such projects by allowing them to reduce their tax bill through a deduction of their R&D costs.

Equipping business owners with knowledge and understanding is key for TLPI.

Simply promoting awareness of the benefits of claiming R&D tax credits will encourage more directors to take advantage of this incentive and be a part of a growing technology-driven or scientific-driven market.

Do You Qualify to Claim R&D Tax Credits?

Your company needs to be a SME (small to medium enterprise); in essence, having less than 500 staff and under 100 million euros turnover. Other areas of qualification are as listed and explained below.

The Nature of the Project

Please note: Although the projects need to be based on specific areas of research, it does not mean that your business has to be a science or technology business.

Claiming R&D credits is open to almost all companies operating in different types of categories; for example, you could be a manufacturing company that is trying to create a software or process (that does not already exist) to increase productivity.

Projects must meet certain criteria, such as revolving around an improvement such as engineering, science based, or software related projects.

All the relevant eligible costs for R&D Projects. Companies can claim the following costs: staff costs, clinical volunteers, third party payments, Utilities (such as light, heat and power), software, external workers, and research contributions.
The project purpose needs to be related to improving the function, quality, reliability or performance of the product, process or service. Evaluation of how your project fits the criteria can be undertaken as advised, to demonstrate your eligibility for the credits.

How to Claim R&D Tax Credits?

To ensure a straight-forward process in claiming R&D credit, we suggest employing the services of a professional. This is one of several strategies that can help you as a business owner, mitigate tax within HMRC rules.
A map detailing the journey of claiming R&D tax credits. Which is as follows: 1. Identify the project 2. Identify the costs of the project 3. Calculate the costs 4. Write out the project details 5. Fill in the form and send to HMRC

To be able to submit your claim for tax credits, there are a few steps that need to be taken to ensure your claim will be successful.

Firstly, the claim must be submitted through your Corporation Tax return. The expenditures related to the research and development being undertaken can be claimed, such as: staff costs, third party payments, external workers, software, utilities, clinical volunteers and research contributions. These costs are then submitted and tallied to calculate the size of the claim.

Secondly, a narrative to describe the project, innovation and research being undertaken will need to be submitted. Examples of information could include how the project has solved a problem and how it will support future capability and solve future issues in the company.

Finally, a CT600 form (a Company Tax Return) must be filled in and included in the application to HMRC.

At TLPI, you can speak directly to an experienced tax and investments consultant who will take the time to understand your individual situation and take you through strategies which can reduce your tax bill.

To understand whether you might be eligible for an R&D credit, and additional ways business owners can mitigate tax…

 

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