Why Wouldn’t You Want to Claim R∓D Tax Credits?
R&D Tax credits have had a disappointingly low uptake in the UK and many eligible companies are not claiming these credits.
When HMRC published their last report on the figures for 2009-2010 for SME manufacturers in the UK only 2000 of the estimated 125,000 companies had filed claims for R&D Tax credits. Not all of these companies would be eligible to make a claim but the figures still demonstrate how low the uptake has been.
The credits were put in place by the UK government to encourage companies to work on innovative research and development projects by offering them a tax incentive. The goal was to make the UK more competitive on a global scale. The credits may be claimed against qualifying Research and Development costs and you will receive either a corporation tax bill reduction or a lump sum.
Who is eligible for R&D Tax credits and how much can be claimed?
There are two schemes available. One for SME’s and one for large companies.
The scheme for SME’s is more generous and they are eligible to receive 225% R&D Tax credits. This means that for every £100 spent on qualifying R&D your company could have the income on which corporation tax is paid reduced by an additional £125 on top of the £100 spent.
Large company Scheme
Large companies are eligible to receive 130% tax relief. This means that for every £100 you spend on qualifying R&D your company could have the income on which Corporation Tax is paid reduced by an additional £30 on top of the £100 spent.
What type of work is classed as R&D?
Your project must be classed as genuine Research and Development. In other words, it must be research into an area where there is no known answer to the problem in that field and your solution would be classed as a scientific or technological advance.
The project must also be related to the area that your company trades in or you must be willing to set up a new company to trade in that area.
How and when do I make a claim?
You make the claim on your company tax return and it usually needs to be submitted no later than two years after the end of the relevant corporation tax period.
My project failed, can I still claim R&D Tax credits?
Yes, even if your project has failed you may still be eligible to apply for R&D Tax credits.
For further information about R&D Tax credits you can visit the HMRC website.
If you have a project and think R&D Tax credits might apply and you need some product development support please get in touch. Innovation and design will make the UK more competitive.