R&D is defined by HMRC as taking place when a project seeks an advance in science or technology, such as the development of a new product, process, service, device or knowledge, or the improvement of an existing ones. Scientific or technological challenges that could not be easily worked out by a professional / professionals in the field need to exist during the project and the resolution of these challenges need to be overcome in a systematic way.
HMRC have a duty to check that claims meet the criteria set out in the extensive legislation and guidelines. Producing a poor quality claim can mean you inherit a greater risk of errors, enquiries, and penalties from HMRC. At Kene Partners, we always take the time to get to know your business; we deliver value by deploying a team who can understand the technological challenges of your innovation, and accurately capture and quantify all the relevant costs and expenditure in line with the governing legislation.
There are two different schemes you can apply for, depending on the size of your business. The SME (small-medium enterprise) scheme is worth up to 33p for every £1 spent on R&D. Businesses with less than 500 staff, and a turnover of no more than €100million or gross assets of no more than €86 million, can apply. Otherwise, you will be classed as a large business and will need to apply for the RDEC (research & development expenditure credit) scheme receiving up to 10p for every £1 spent on R&D. There may be other factors which can affect your eligibility to claim under either scheme; to find out which scheme is right for you, book a free consultation with our experts.
There is no limit to how many times you can claim. You can submit one claim for each tax period.
The scheme launched in 2000 although awareness is still very low, with many companies missing out on vital growth fuel for their business. For example, around 70% of the companies we speak to are unaware they can claim. With R&D conjuring up images of people in lab coats, many companies assume they are not eligible due to the nature of their work. R&D is happening across all industries and we want to make sure the scheme is being utilised to its full potential.
You need to be a UK limited company subject to UK corporation tax. A company does not have to be paying corporation tax, it can still be in a loss position and make a claim. You cannot claim SME tax relief if:
In these cases, the team at Kene Partners will advise if you can claim under the RDEC scheme instead so as not to miss out on the valuable benefit your company could receive.
Yes! We work with many start-ups that do not realise the work they are doing daily qualifies for the R&D scheme. Getting money back from the scheme can be a great way to improve cashflow, extend funding and demonstrate to investors that you are building something valuable in the eyes of the government. We can also help set you up certain processes to maximise future claims as you scale.
You can still claim! SME R&D Relief will allow you to claim a tax credit if the company is making a loss (worth up to 14.5% of the surrenderable loss) and allows you to deduct a further 130% of qualifying costs from your yearly profit, as well as the normal 100% deduction (totalling a 230% deduction). In fact, if you are a loss-making company this means you could receive a cash benefit of up to 33% of every pound you spend on R&D.
The legislation is purposefully broad to capture innovation in all sectors. Read our sector guides to understand more about R&D in your industry.
Yes, you can still claim even if your project was not successful. The purpose of the scheme is to support innovation. There is no success requirement for R&D, and in fact, a failed project can help to demonstrate the complex nature of the R&D that was carried out.
Yes, claims can made up to two years after the end of an accounting period (e.g. accounting periods are usually 12 months long so if accounting period ended on 31 December 2020, then you have up to 31 December 2022 to submit an R&D claim for this period).
Regardless of where the R&D takes place, if you are a UK registered company subject to corporation tax, you can claim for qualifying activities. The amount you can claim may be capped if you do not have a lot of UK-based employees; please arrange a consultation with us for further guidance.
You can claim at any point during the R&D process, not just at the end of a project, if there is qualifying expenditure that falls within the financial year you are claiming for. Ongoing projects can be claimed across multiple years or retrospectively (up to two years).
You do not need to work with us or another R&D tax adviser to submit a claim but doing so can hugely increase your chance of success and optimising the value. R&D claim preparation is a technically demanding process, and as industry specialists, we are key in helping companies to quantify, support and maximise R&D claims. We have the technical knowledge, expertise and key relationships to make sure you receive the full amount of benefit you are entitled to. Whilst you might want to save costs by not working with an R&D tax adviser, the reality is that it will likely cost you more – both in time and money.
It’s important to say here: at Kene Partners, our fees reflect the quality of the service we provide. For end-to-end claims, our fee is taken as a percentage of your final claim value, so you will not spend a penny until your benefit is received. Our percentage is determined on a case-by-case basis, depending on the business size, complexity and timeline of the submission. As part of our commitment to outstanding service, we invest in our highly skilled team of engineers, sector specialists, chartered tax advisers, and R&D specialists – our fees allow us to remain ahead of the curve in a fast-paced environment to better support our clients.
Our award-winning end-to-end solution means we complete most claims within 28 days – although this can be sooner if needed.
Enquiries typically result in your tax credit/repayment being delayed, giving the tax inspectors time to better understand the submission and aligned costs. We ensure that all claims are technically and financially robust to withstand HMRC scrutiny and therefore minimise the risk of HMRC enquiry. At Kene Partners, we have a 100% success rate, whilst retaining the full claim value. Other outcomes of an enquiry can result in your claim value being reduced and the possibility of incurring penalties.
Qualifying expenditure includes staff costs, subcontractors, software, consumables, externally provided workers and research contributors. Some costs may not be eligible depending on the size of your company; book a free consultation to find out more.
As with most professions, it’s very rare for someone to be an expert in all things, similar to going to the doctor and being referred to a specialist. R&D tax requires in-depth technical knowledge about your industry to identify the full potential of your claim. We celebrate collaboration at Kene Partners and can work closely with your accountant to better optimise the R&D claim for your company.
If you are an accountant, you can outsource the work to us – we will manage the R&D claim process from start to finish and make it a seamless process for you and your client.
Once the claim has been put together and submitted, it can take up to 4-6 weeks for HMRC to process. This can sometimes be longer during busy periods. Payment usually follows after 14 days.
According to the latest HMRC R&D Tax Credit Statistics, the average SME claim is £57,228 (2019) and the average RDEC claim (for large companies) is £632,931 (2019). The best way to understand how much money you can claim is to book a free consultation with our team. They will discuss qualifying projects and provide you with a claim estimate. Typically, because of our experience and understanding of the R&D tax credit legislation, our average claim is bigger than the industry standard.
If your company is profit-making, you can receive the benefit in the form of corporation tax reduction, corporation tax refund or a cash credit. The company may also have corporation tax losses generated as a result of the R&D to be carried back against the previous year trading profits or carried forward to be set off against future trading profits.
If you are a loss-making company, the losses generated as a result of the R&D can be carried back against the previous year trading profits, carried forward against future trading profits or similarly surrendered for a cash credit.
With the corporation tax rate being increased from 19% to 25% with effect from 1 April 2023, the R&D scheme will only become more and more beneficial.
From 1 April 2021, HMRC introduced a cap on the amount of R&D tax credit that will be paid to a loss-making SME. The R&D tax credit will be capped at £20,000 plus three times the total PAYE and NIC liability of the company for the year. A company making a claim for a payable R&D tax credit of less than £20,000 will not be impacted by the cap.
Whilst there is no stipulation for how the saving can be used, it’s our mission to help companies bring their ideas to life by utilising the full benefit of R&D tax credits. The cash injection that companies receive as a result can be game-changing, rewarding forward-thinking businesses that take risks by never standing still.
R&D Tax Associate
Arrange a free consultation with our team of experienced and approachable tax incentive advisers today. At Kene Partners, our mission is to help innovative companies access millions of pounds of government money set aside for funding your innovation. Your business could be next.