Is there a minimum expenditure for R&D tax credit claims?2 min read
This is a perfectly valid concern for any business owner thinking of submitting an R&D Tax Credit claim following a recent project seeking to research or develop an advance in their field.
That’s because prior to April 2012, the UK Government had set a minimum of £10,000 qualifying expenditure on all R&D projects. Fortunately, this was changed on the 1st April 2012, meaning that there is no longer a minimum amount of expenditure on qualifying R&D projects.
Eligibility for R&D Tax Credit Claims
Of course, the government still operates strict criteria when it comes to the innovative projects eligible for R&D tax credits. If you wish to make a valid claim, you must be able to prove the following:
- Your business is eligible to pay UK Corporation Tax
Your business must be a limited company and therefore eligible to pay Corporation Tax in the UK. Subsequently, businesses that are Limited Liability Partnerships (LLPs) that do not pay Corporation Tax are ineligible for R&D tax credits.
- The business is not in administration or liquidation
Not only must the business continue to be a going concern, but it must also be able to demonstrate that it is not in administration or liquidation.
- Your R&D project sought an advance in your industry
The project your business undertook must have sought to create an advance in your industry, not just your business. For instance, the use of existing technology that had never been handled before in your industry is not a qualifying project.
- You can demonstrate a fellow industry professional couldn’t easily work out your advance
You must be able to clearly outline why a fellow professional in your industry would not be able to easily work out your advance. It’s possible to demonstrate this by mentioning failed attempts at finding a solution to your industry problem. You might also wish to use the professionals involved in your project to state the uncertainties and complexities involved.
How much you could claim
If you are a start-up business or a small or medium-sized enterprise (SME) with less than 500 full-time employees, you can claim back up to 33p for every pound you spent during a qualifying R&D project through the SME R&D Relief scheme.
There is no limit to the number of qualifying R&D projects you wish to undertake. Meanwhile, companies with workforces of more than 500 full-time staff can claim back 11p in every £1 spent during a qualifying R&D project via the R&D Expenditure Credit (RDEC) programme.