We know that the R&D legislation can be dense and daunting, so we answered some of the most frequently asked questions in a clear and simple way below. If you still have a question or want to know more, please contact us, we’d love to hear from you.
An R&D expense is any expenditure which the R&D legislation associated with your investment in R&D. Companies who are spending money in their risk-taking projects with science and technology may be investing in R&D for tax purposes. And, if eligible, you can claim back tax on some of these costs in the form of R&D tax credits. For the purpose of R&D tax credits, qualifying costs include staff costs (including subcontractors), consumables (including light, heat and water), and software.
You can read more about how costs are calculated for each category here.
For loss-making companies, you have two options. Carry the additional loss forward where it will be offset against future taxable profits, or choose for 230% of qualifying expenditure – or revised loss – for the period (whichever is lower) to be surrendered to HMRC in exchange for a cash tax credit worth 14.5%.
For an example of calculating R&D tax credits for a loss-making company, you can read our piece on calculating R&D tax credits here.
The SME incentive is for businesses with fewer than 500 staff, a turnover of less than €100m, and less than €86m of gross assets. RDEC is typically for larger business with more than 500 employees and a turnover of more than €100m. SMEs who have been subcontracted to do R&D work can also claim under RDEC. The maximum rate of benefit available is different for each scheme.
Read more about R&D tax credits here.
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