R&D Tax Credits are the primary form of tax relief for promoting innovation in the UK. A cash benefit of up to 33.35% of qualifying R&D expenditure can be claimed that includes the costs of testing, experimentation, software / product development and process improvement.
R&D Tax Relief is the name of the scheme that allows companies to claim an enhanced tax deduction for qualifying R&D expenditure. The enhanced amount can be surrendered for a cash credit (the R&D Tax Credit) if the company is loss-making, or used to offset tax due if a company is profitable.
Any company subject to UK corporation tax can potentially make an annual R&D claim to HMRC for qualifying activities.
Qualifying projects must be in a field of science or technology and can include new product or process development, or making an appreciable improvement to those that already exist. You do not need to be the first in the industry to achieve something, providing that the technology solution is not in the public domain, or obvious.
R&D Tax Credits are available for Small and Medium-sized Enterprises (SME) while the R&D Expenditure Credit gives an above-the-line benefit to Large companies.
The R&D Tax Relief scheme is administered by HMRC who have 5 Specialist Units that deal with all SME R&D claims. The inspectors at these units are usually very experienced and adept at investigating whether or not claims meet the requirements of the legislation. A claim can be made either by filling in the appropriate boxes as part of the Corporation Tax return (CT600), or alternatively, by filing an amendment to a return. We always advise the latter as it ensures that all the supporting documentation reaches the inspector at the same time as the claim, thus avoiding the possibility of an enquiry.