R&D Tax Credits

What are R&D Tax Credits?

Learn if you qualify and see how
much you could receive

R&D Tax Credits

What are R&D Tax Credits?

R&D Tax Credits are a government incentive that was introduced to reward eligible UK Limited Companies. The incentive provides reductions or rebates of corporation tax payable for monies spent on eligible R&D activities.

When did R&D Tax Credits start?

The Government in 2000 rolled out The R&D Tax Credit and has gained substantial traction in the last few years, supporting innovate businesses of all sizes to continue to grow and remain competitive on the global market.

Calculate your R&D Tax Credits Benefit

The easiest way to calculate your company’s estimated R&D tax relief is by using our handy quick calculator tool.

Do you have more than 500 employees and turnover exceeding €100,000,000?

No

How much have you spent on R&D?

£10,000

What was your profit the same year?

£0

Our upfront fee

Always £0

You could receive a tax credit of

£1,885

Please note: This calculator is intended as a rough guide.

Calculation Example

As a simplified example; for instance if an SME had developers working exclusively on an eligible R&D project and paid them a total of £150,000 per year, they could use the incentive record that expense at £345,000 (230% x £150,000). The additional £195,000 of the expenses would mean the company’s taxable profit would be reduced.

The calculation shows how this affects a profitable company; £29,625 from corporation tax savings and the payable tax credit. In total they would receive back 19.75% of their R&D investment. If you are not eligible to claim the relief as an SME you might however, still be able to claim under the RDEC incentive.

This calculator is intended as a rough guide.

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Total R&D Expenditure
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Average R&D Tax Relief Claim

What counts as R&D for the R&D Tax Credits incentive?

Creating new products, processes, or services.

If you’re unsure if your project is viable, or if you could theoretically achieve it but are unsure how to complete it in practice, you could be indeed resolving technological uncertainties and be carrying out qualifying R&D.

Adapting an existing product, process, or service

Also, within HMRC’s research and development definition, failed projects can also be eligible under the R&D Tax Incentive. As long as the work carried out on the project is deemed as qualifying activity before the project itself is discontinued, there may be eligible costs to include in your claim.

How do R&D Tax Credits work?

Step 1:

Invest in R&D eligible projects.

Submitting a claim

Step 2:

Submit a R&D Tax Credit Claim.

Woman looking seriously

Step 3:

Claim back up to 33% of the eligible costs incurred.

Cash for claiming

Step 4:

Grow your business (and re-invest in R&D eligible projects for a larger incentive).

Showing the growth of a business

The potential benefit varies depending on the amount invested in R&D, the tax position of the company and whether the company falls into the SME or the RDEC scheme.

You’re able to submit an R&D claim for the last two financial years as it follows the amendment window of the company’s CT return, this means if you haven’t made a claim before you should be eligible for a tax repayment for those years. If your company has already paid the corporation tax, then you’ll receive the overpaid tax as a rebate from HMRC.

This incentive also benefits loss-making companies, giving the option to surrender losses created (up to 230%) at 14.5% or to carry the additional losses credited forward to be used against future profit.

Finally, following the successful competition of your initial R&D Tax Credit claims, you can carry on benefitting from the R&D incentive every year that you are conducting eligible work to reduce your tax liability going forward.

How to use our free R&D Tax Credits Calculator

Firstly, any UK Limited company from any industry, whether profitable or loss-making can benefit from the incentive, as long as it is conducting eligible work such as developing new products, technology, processes, or services.

HMRC uses this fiscal lever to help stimulate investment in innovation within the UK, which in fact is proven to be key for growth and future economic prosperity.

The incentive also applies to companies of all sizes, including loss-making ad profit-making companies, and you can claim back as cash the tax you have overpaid in the previous two years.

To use our calculator, simply input if you are a loss or profit-making company (and by how much) and how much you have spent on your R&D activity. The calculator will then generate an estimate of your potential claim, which you can email to us and begin the claim process!

Benefits of R&D Tax Credits:

Limitations of R&D Tax Credits:

Scientist presenting data
HMRC Quote

To be able to claim R&D Tax Credits, you must meet a few criteria:

If you are unsure whether your business and/or activities would qualify for R&D tax relief, we’re happy to help. Our advice is free and it comes with no-obligation.

When does a R&D Tax Credits project start and end?

A R&D Project Starting

The project starts when work to resolve the uncertainties begin.

Project Middle 2

A project ends when that technical uncertainties is resolved or the work to resolve it ceases.

Project end R&D 3

R&D can take place even after production starts when additional technical uncertainties arise.

*Only technical design is eligible, if it is helping to overcome an uncertainty in the project.

What Qualifies in your sector for R&D Tax Credits?

Accommodation & Food

Admin & Support Services

Agriculture, Forestry and Fishing

Arts, Entertainment & Recreation

Construction

Education

Electronics

Electricity, Gas, Steam and Air Conditioning

Energy Services

Engineering

Financial Services

Food and Drink Manufacture

Health and Social Work

Information & Communication

Insurance

M&E Services

Manufacturing

Mining and Quarrying

Pharmaceutical

Professional, Scientific & Technical

Public Admin, Defence and Social Services

Real Estate

Retail and Wholesale

Software and Technology

Water, Sewerage and Waste

Transport and Logistics

Types of incentive that our R&D Tax Credits Calculator covers

For example there are two branches of the incentive; the first covers SMEs (Small and Medium-Sized Enterprises) and the second is for Large Enterprises (LEs).

SME R&D Tax Credit Scheme

Companies that fall within the SME incentive are able to deduct an additional 130% of their qualifying expenses from yearly profit, in addition to the normal 100% deduction which adds up to a total of 230% deduction.

The R&D incentive can help SMEs support their continuing and new innovative projects. If a company is loss-making, in certain circumstances they can surrender the losses in return for an R&D tax credit worth up to 14.5% of the surrenderable loss.

SMEs under the RDEC Scheme

The SME incentive may not be available to companies that fall within the SME category if they fall within certain criteria. For example, if they are in receipt of other NSA (Notified State Aid) for the qualifying project(s). In certain situations, these companies will be able to claim via the RDEC scheme if they are involved in subcontracted or subsidised research for a large company, or because of a grant or subsidy.

Eligible expenditure under the RDEC incentive without reducing the value of the grant received is a potential way of claiming R&D tax relief, taking the form of a Research and Development Expenditure Credit.

RDEC (Research and Development Expenditure Credit)

Large companies can claim RDEC (R&D Expenditure Credits). The RDEC incentive is less generous than the SME incentive, paying up to 11% of their eligible R&D expenditure as an Expenditure Credit rather than a deduction of taxable profits.

For loss-making large companies, Expenditure Credits are fully payable but subjected to certain restrictions.

Step 1: Discovery Meeting

This meeting can be conducted in-person or over the phone. During this meeting, we will talk you through the incentive and establish whether the work your company has carried out qualifies under the R&D Tax incentive. As a result we will also outline our work processes and what you should expect.

Happy consultant on the phone looking at his laptop discussing a R&D Tax Credits claim
Technical report writing for R&D Tax Credits, man explaining R&D process to analyst

Step 2: Technical Meeting and Report Drafting

We visit your site and interview key personnel to get a full understanding of your businesses operations and gather the technical details of the development work undertaken in the period(s). After that, we will also go through the financial aspect of the claim with your company’s finance function to get up-to-date financial data for analysis.

Step 3: R&D Benefit Analysis

We analyse all eligible costs and calculate the maximum benefit available based on accurate and up to date data. Above all from here we can explain how much you can expect and in what form you can expect the benefit based on your company’s tax position.

Man typing on a keyboard
Hands pointing at graphs discussing potential R&D Tax Credits claim

Step 4: Review & Submission

Following an internal review of the compiled claim, we aim to submit the completed documents to HMRC within 2 weeks of receiving all the required information. Meanwhile, HMRC aim to process payable credit claims within 28 days and pay out the benefit. In the event that HMRC require additional information relating the claim before the processing can be completed, we will oversee the process and work with you to answer any additional questions. Additionally we also work with Ex-HMRC consultants and IP Lawyers to streamline this process and minimise the impact on your business.

Step 5: HMRC Process your R&D Tax Credit

HMRC will process a reduction in liability instantly (once submitted). To clarify payable credits are issued typically within 4 weeks either by cheque or bank transfer.

Man and woman shaking hands over a table with graphs, successful R&D Tax Credits claim approved

Things you need to support your R&D Tax Credits relief claim.

To start the process, we do require certain supporting evidence to be made available to make the claiming process as efficient as possible. Therefor. the below are examples of the information we require at the start and during the process:

Project Details

Details of the work undertaken during the claiming periods, detailing the advances sought and the technical uncertainties encountered for each of the eligible projects to be kept to support the claim.

Records of costs

A breakdown of the expenses that have been incurred relating to the eligible projects discussed throughout the claim process.

Staff Involvement

Personnel with both direct involvement and indirect supporting activities relating to the eligible projects undertaken during the claiming period(s). Thus timesheets are desirable; however, it can be discussed in more detail with the Analyst team.

Timing Frameworks

Details of the proportion of time involved on each of the eligible projects undertaken in the claiming period(s) relating to eligible activities.

Choosing an R&D Tax Credits Specialist

Companies are sometimes wrongly advised by their accountants that they are not conducting eligible activities. This is understandable as while your accountant tends to boast excellent financial expertise, they may not be fully aware of the nuances of R&D tax legislation or, critically, the advances being sought by your projects.

Why choose Counting King R&D Tax Credits Consultants?

That is not to say that your accountant’s knowledge of your company and its structure isn’t of vital importance for the process to be conducted as efficiently as possible. Therefor, this is why we aim to work closely with your accountant throughout the process.

An incorrectly submitted R&D tax relief claim can lead to an HMRC compliance check/enquiry, this may result with the possibility of losing the entire benefit. As R&D tax specialists, we will make sure that only eligible work is included, and we will capture all the eligible costs.

Start your claim