R&D tax relief – 5 common misconceptions demystified
The Research and Development Tax Relief scheme (R&DTR) helps businesses fund their research and development activities.
There are two main formats; R&D Tax Relief for SMEs and R&D Expenditure Credit for Large Companies (RDEC). Which a company is eligible for depends on the size and the conditions under which they are carrying out their research or development activities.
How much can I claim?
If your company employs fewer than 500 members of staff, it’s likely you can claim under the SME scheme which means you can get up to 33.35% of your eligible R&D spend as a tax credit. For most of the companies we assist in claiming, this results in a five or six figure pay-out from HMRC! Larger companies are eligible under the RDEC scheme which can be up to 9.72% of eligible R&D spend.
Common misconceptions demystified
1. R&D is not only for scientists – The R&D tax legislation is much broader than many people think and most of the companies making claims are not within the scientific sector at all.
2. Being paid to undertake R&D does not mean you can’t make a claim – In order to determine the eligibility of a project under the SME scheme it is important to examine which company takes on the technical and financial risk – one of the key determining factors for this is which company “takes the hit” when the complexity of the R&D results in additional work being undertaken.
3. Receiving grant funding does not exclude a company from making a claim – However, it may exclude that company from claiming all of the expenditure under the SME scheme. Whilst this may mean that the company receives a lower rate of relief, as they may have to claim under RDEC instead – it will still enable them to gain almost 10p in every £1 back.
4. You have longer than you might think to make a claim – Time is of the essence, although the R&D tax scheme does allow companies to claim for R&D activities in the last two financial periods.
5. Making a claim doesn’t have to be time-consuming or result in an investigation by HMRC – Experienced R&D tax specialists, like the team here at Moore Kingston Smith, take the weight off the company’s shoulders, ensuring that they are claiming all the eligible R&D within the business while satisfying HMRC with a strong technical justification.
Case study: Moore Kingston Smith secures 6-figure cash back for broadband company
We recently helped a company that delivers high speed fibre networks claim over £100,000 in R&D tax credit. We helped them identify eligible R&D projects, collect the information required to make the claim, and wrote an in-depth technical report to justify it to HMRC.
Just over two months later, our client received their refund, with more to follow over the next few years. The significant cash benefit will help the company fund further R&D activity, from a source that would have been overlooked without Moore Kingston Smith’s advice.
For more information and to find out how much you could claim, please contact Thomas Hayden from the Moore Kingston Smith tax team on firstname.lastname@example.org.