The R&D Tax Credit incentive is calculated on the costs incurred during the development period for each of your companies financial years. To see how much you could be entitled to, roughly total how much you have spent within a 12 month period up to your companies year end. Costs can include:
If we use a small manufacturing firm who make cardboard boxes as an example, they may have designed several new packaging prototypes. They have 30 staff but only 5 are involved in the R&D on a part time basis which totals approx £70k. They go through considerable prototypes and iterations throughout the year and calculate this to cost approximately £20k. They have taken out a new software package which has cost them £5k in software licences. A % of their warehouse utility costs can be attributed and finally a portion of the travel they do can be claimed.
Now they can see they have a benefit amount of £24,700 which they can use to reduce their upcoming corporation tax bill. If the benefit amount is more than their tax bill they can surrender the surplus for a payable tax credit which comes in the form of a cheque or bank deposit.
|Materials & Wastage Costs||£20,000|
|Software Licence Costs||£5000|
Potential payment from HMRC
SME (Small or Medium sized enterprise)
Fewer than 500 staff
Less than 100 million Euros (turnover)
Less than 86 million Euros (assets)
RDEC (Research and development expenditure credit)
More than 500 staff
More than 100 million Euros (turnover)
More than 86 million Euros (assets)
Received government state aid
Received de minimis aid