Your Guide to R&D Tax Credits

Research and Development (R&D) Tax Credits exist in the UK to reward innovative companies. This government incentive can be a valuable resource for businesses that are looking to channel more funding into R&D and accelerate the impact this can have on future growth. If you’re looking at R&D Tax Credits for your organisation then this is what you need to know.

What is R&D?

What counts as R&D for the purpose of R&D Tax Credits is a crucial question. The criteria that have been defined for this are intentionally broad. It is essentially where your business is taking a risk by trying to resolve scientific or technical uncertainties.

How do R&D Tax Credits Work?

This is, essentially, tax relief. Where cash is being spent on R&D then a claim can be made to recover this cost, either in the form of a cash payment or a corporation tax reduction. If your business is developing new processes, products and services – or enhancing those that already exist – then there is the opportunity to enjoy the benefits of R&D Tax Credits. This isn’t just about businesses that are operating in fields like science and technology either. There are funding opportunities in every sector and the scope for identifying R&D is intentionally broad.

What makes your business eligible for a claim?

Eligibility is very simple – your business must be a limited company registered in the UK for corporation tax, have carried out activities that count as qualifying research and development and spent money on those activities. There are no sector limits on businesses that are eligible to claim R&D Tax Credits – you could be operating in aerospace, construction, technology or fabrication. There are currently two schemes available:

● SME. This is for businesses with less than 500 staff and no more than EUR 100 million turnover or EUR 68 million in gross assets.
● Large company. The second R&D Tax Credits scheme will apply to larger companies with figures that top these limits.

What costs Qualify?

R&D Tax Credits can be used to cover the cash that has been spent on R&D in order to make it happen. There are specific costs that qualify, including the cost of the staff required for the project, such as salaries, pension contributions and reimbursed expenses. Other costs that qualify include some types of software, the cost of contractors and freelancers and payments made to those who have taken part in clinical trials.

What are R&D Tax Credit Rates?

There are different rates for different types of companies. For example, the rate for loss-making companies is 18.6p for every £1 spent. Profit-making SMEs can claim 21.5p for every £1 spent. And large companies can claim 20p for every £1 spent. The size of the average claim in the UK is £53,663.

Make the most of R&D Funding

R&D Tax Credits can provide essential support for ongoing innovation within your business and are well worth investigating. SPRK R&D Advance Funding can support you with access to capital on an ad hoc, quarterly, or annual basis – it’s entirely up to you and what works best for your business. If you’re unsure on the best approach, get in touch with our dedicated advisors – let’s progress together.