What are R&D Tax Credits?
Research and development (R&D) tax credits are a UK government tax relief that rewards companies who invest in innovation. Companies that develop new products, processes, or services, or enhance pre-existing ones are eligible for a cash payment and/or a Corporation Tax reduction. R&D Tax Credits can either complement or act as an alternative to innovation grants and are accessible to companies of all sizes and sectors.
What counts as research and development (R&D)
No matter your company size, revenue or sector, If your company is attempting to ‘resolve scientific or technological uncertainties’ then you may be carrying out qualifying activity. Examples of R&D might include creating new products, processes, or services, or modifying existing products, services, or processes.
It’s important to note that R&D doesn’t have to be successful to qualify for R&D tax credits. You can also claim for work undertaken on behalf of a client as well as your own projects.
If you’re an SME
The majority of companies in the UK fall into the SME category including startups. SME’s can claim back up to 33p for every £1 spent on R&D, receiving a cash benefit regardless of whether your business is loss-making. The average claim in the UK for an SME in 2015-2016 was £61,514.
If you’re a large company
For companies with over 500 people or a turnover of €100 million turnover and €86 in Gross assets, there is the ability to claim 10p for every £1 spent on R&D – even if they are loss-making. The average claim made by large companies in the UK was £348,916 in 2015-2016.