R&D tax relief FAQs

Frequently Asked Questions About R&D Tax Credits

Do I qualify for R&D tax credits?

R&D tax relief is a benefit available to companies under the UK tax regime. If your company is attempting to develop or build something new or improved that  has technical challenges associated with it, then it may very well qualify for R&D relief.

Your company’s project does not necessarily need to take place in a particular sector or even have a successful outcome but it must have a degree of ‘technological or scientific uncertainty’ that is resolved through your work. I.e. the technical staff either don’t know what the solution is to a particular technical challenge, or how to achieve the solution in practice.

You can claim for projects that has had expenditure in your current financial year and also retrospectively for up to 2 prior years.

Click here to learn more about how to assess your company’s eligibility.

How much can I claim?

Your company’s claim amount will depend on a number of factors with the most important one being the qualifying R&D expenditure – the amount your company has spent on qualifying R&D activities.

As a ‘rule of thumb’, a company meeting the definition of a Small or Medium Enterprise (SME), can claim back 24.7% of R&D expenditure if profit-making, and 33.35% if loss-making.

If a company cannot claim under the SME scheme, because for example, it doesn’t meet the financial or criteria to be considered as an SME, or work has been subcontracted to it, it may still be able to claim Research & Development Expenditure Credits (RDEC) which is worth 11% of qualifying R&D expenditure.

Visit our R&D calculator to get a better idea of how much you could claim.

Am I an SME?

The definition of an SME for R&D tax purposes is an enterprise that employs 500 staff or less and that has an annual revenue of less than €100 million or a balance sheet of below €86 million. Otherwise your company is defined as a Large Enterprise.

Particular attention needs to be paid to subsidiaries or shareholders owning or controlling 25% or more, as their staff and financial figures may be aggregated with the claiming company for the purposes of the SME test.

How long does a R&D tax credit claim take?

Our tried and tested process means that a claim usually takes no more than 28 days from start to finish. Once submitted, HMRC aim to review 95% of cases within 28 days of filing. We do not charge you a single penny until your claim payment has been received.

Can you work with our existing accountants?

Yes, we routinely work with many of our clients’ finance teams. We are accustomed to working closely with both in-house accountants and external finance teams and are able to guide them through every aspect of the R&D claims process.

Is there a risk of a HMRC inspection if I make an R&D tax claim?

The entire Corporate Tax system works on the basis of self-assessment with HMRC in a compliance role, investigating high-risk claims, and additionally, randomly choosing to inspect other claims.

A few of the risk factors that can increase the risk of an HMRC enquiry are:

  • Claims prepared by someone without the required technical, legislative or financial knowledge.
  • Claims submitted by an agent who has a track record of ‘getting it wrong’
  • Claims without supporting documentation showing how the claim has been made

By choosing to work with Innovation Plus, you will be minimising this risk. Since 2009, our team has prepared claims in a wide range of sectors, with some of the claims being highly complex. We always aim to secure the maximum amount for our clients  allowable within the legislation while avoiding the inclusion in a claim of anything not allowable.

You can read some of our success stories here.

How much work will we have to do in making the claim?

Our aim is to make the claims process as easy as possible for you so that it doesn’t take you and your team away from managing your business, developing your products and carrying out R&D.

In practice, this usually means we require no more than a half-day of technical resource time and the same on the financial side. If your records are in good shape, we frequently require less. To give you a better idea of our full process and your role, click here.

Isn't it cheaper to prepare an R&D tax claim myself?

You can but in our experience, this approach can easily result in a significantly smaller claim, an HMRC enquiry or in the worst case an HMRC penalty. With a 25% penalty for careless overclaiming (and not taking the appropriate advice is considered  as careless by HMRC) any potential saving can be easily wiped out, as well as increasing the chance of future claims receiving additional scrutiny.

It takes specialist knowledge to prepare a claim that yields the highest amount while meeting the legislative criteria and avoiding any risk.

Additionally, how much is your time worth? Not using a specialist who understands both your technology and the tax law will mean that you or your staff end up having to write the relevant supporting documentation yourself, showing how the work claimed for complies with the legislation. This drain on valuable staff time will only be exacerbated if HMRC make further enquiries into the work carried out and request interviews with your technical staff.

If I've received a grant, will that interfere with my ability to claim R&D Tax Credits

It may do but not necessarily. It depends on what sort of grant it is. Grants that are notifiable state aids will preclude you from claiming R&D tax credits for any part of that project, but not for other projects. If you are in receipt of other types of grants, e.g. de minimis or FP7 then the grant-subsidised expenditure will not be claimable but other qualifying areas of the project will be.

Where a grant stops you from claiming R&D tax credits, you may be able to claim Research & Development Expenditure Credits (RDEC) instead which, although not as valuable, can still be worthwhile.

How can I tell what sort of grant I have received?

Usually this will be in the grant documentation that you sign. As part of our claims preparation process, we will review all your relevant grant documentation to ensure that your claim complies with the legislation.