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WHAT ARE R&D TAX CREDITS?

Research & Development Tax Relief, also known as Tax Credits is an incentive-based initiative spearheaded by the Government for corporates who invest in innovation and are made available for all businesses that want to channel development through research and innovation. This incentive-based program focuses on progression under the leadership of science and technology. Companies are rewarded based on their proactive participation and the incentives derived can from Tax Reliefs acts as a valuable financial cushion for companies to grow and thrive in.

Below Chart explains Principled cycle of R&D Tax Credits

Investing in Innovation

spending money on innovation will enable you to make R&D tax credit claim

Receiving R&D Tax Credit

HMRC will reward you either in form of corporation tax reduction or cash payment from HMRC

Growing Your Business

Accelerate your business by once your business has received first Claim

Reinvesting in Innovation

Developing new products and services by hiring new staff will encourage companies to grow

Receiving Larger R&D Tax Credit

Spending More on R&D activities will help develop new competitive advantages & thereby receiving larger tax credit

HOW DOES R&D TAX RELIEF WORK?

Even though this financial scheme aims to help companies prosper by valuing their contribution towards scientific and technological innovations, there are few critical regulations that this scheme follows

Most companies (even the ones who are not aware of it) eligible for R&D Tax Reliefs, regardless of the success of the innovation research. However, in order to claim tax benefits for your R&D project, the company needs to-

Conduct their research and development based on a thorough and systematic strategy
Partake in innovative projects with an aim that they need to achieve advancement in the field of science and technology

Take into account the technological or scientific uncertainties that come with R&D projects.
Ensure the R&D initiative is in accordance to the company’s existing or present nature of trade. Companies can participate in R&D for a start-up but clear records Should mention the company intends to make R&D valuable to future trade prospects

Possible Grounds for claim

R&D investment costs can be claimed right from the date of project initiation to the date of discovery or project conclusion. However, claims pertaining to production and distribution of goods and services, land costs, capital investment, rent, patent or trademark costs are not included in the R&D Tax Relief. However, you can claim benefits for the following-

Labour Costs

Employee participation needs to be justified by salaries, overtimes, wages, NICs, Pension fund contributions etc can be taken into account for R&D Tax Relief. Admin, HR, and support staff costs relating to the research

Sub-Contractor Costs

You can claim up to 65% of the relevant costs incurred in the nature of payments made to external agencies and subcontractors, provided they have proactively contributed in the research program.

Technological Costs

Any investment on technology to accelerate or facilitate the research and development process can be claimed under this scheme. This includes software licenses, machinery or equipment hires.

Clinical Trail Costs

Based on the nature of your research, you may need volunteers for clinical trails which can be taken into account when claiming benefits for your R&D. For instance, if you’re research involves pharmaceutical aid, claim benefits for payments made to volunteers can be taken into account.

Consumable Costs

Consumable items in the form of utilities or materials used in the research project can be claimed too, but the claims will levy the proportion of usage within the project.

R&D Tax Credits