The importance of R&D credits
The ways in which organisations adapt to the changing economic environment may be innovative, creative, or technologically driven. All have an element of Research & Development.
Statistically, we have proven that claims made by a specialist in this area are twice as large as those awarded to a non-specialist advisor.
How we can work with you
Our team can identify all types of claims, e.g., if your organisation is:
- completely changing its production to meet NHS shortages
- delivering high demand products
- having to reconfigure production lines or manufacturing methods to accommodate social distancing and supply chain shortages
- having to improve its digital and logistics offerings to adapt to quickly changing shopping habits
- implementing systems to manage cybersecurity or new IT systems
- manufacturing new tests, vaccines, or medicines
Different R&D credit regimes
There are two R&D credit regimes, which both share the same definition of what qualifies as R&D.
SME R&D relief
This is for companies that have less than 500 employees and turnover less than €100m or a balance sheet less than €86m). Those companies get a super tax deduction for their R&D at 230% for every £1 spent, and losses generated by R&D tax credits can be surrendered to HMRC for cash at a rate of 14.5%.
Research and Development Expenditure Credit (RDEC)
This is a direct contribution of 13% from the Government more akin to a grant than tax relief and can be repaid if the claimant is loss-making. The extra benefit of RDEC is that it is booked as a reduction in operating costs, not tax and thus also helps to improve underlying profitability.
In addition to the R&D credit regimes, capital spend on R&D can also qualify for 100% capital allowances, and where the research gives rise to a patent, future profits attributable to that patent are effectively taxed at 10%.
Each of these reliefs and incentives has a two-year claim window, so if you have implemented R&D in the current financial year, you can revisit the position for the last two accounting periods too. All R&D incentives give rise to cash tax savings, and in some cases, actual cashback, so are invaluable in these unusual times.
Get in touch
If you would like to find out more about R&D Tax Credits and the eligibility criteria, please get in touch through the link below.