Research & Development (R&D) tax credits for IT companies and businesses
Research and development (R&D) tax relief was introduced in April 2000 for qualifying expenditures incurred on R&D work. Our colleagues at Abbey Tax specialise in R&D tax credits for IT companies - read on to find out how your business can benefit.
To this date, R&D tax reliefs are among the most under claimed tax incentives currently available. Eligible companies can benefit from a tax credit if they are loss-making or a corporation tax reduction if they are profitable.
What are R&D tax credits?
The tax credits can take the form of either significant cash back or a reduction in a company’s liability. What’s more, R&D relief can be claimed whether the company is making a profit or a loss.
HMRC define R&D through a wide range of commercial activities, such as seeking an appreciable improvement to existing technology. This tax incentive encourages companies to invest in developing or improving products and processes, whilst eliminating some of the financial risk involved.
Am I eligible for R&D tax relief?
Many believe that because they have no dedicated R&D division or state of the art laboratory they will not qualify for this tax relief.
If you can answer yes to any of the following questions, then you may be able to make a claim and receive a substantial payment from HMRC.
- Does the company undertake the development of new products/processes?
- Is the company aiming to duplicate existing products or processes in an appreciably improved way?
- Does the company employ technical staff, process engineers or engineers specialising in metals?
- Does the company incur expenditure on staff costs, consumables and/or subcontractor costs in order to undertake development work?
What can I claim research and development Tax Credits for?
The UK Government’s definition of R&D for tax purposes is surprisingly wide. It is defined as activities that overcome technological uncertainties, aimed at achieving an advance in technology. An advance in technology does not necessarily mean ground-breaking, innovative or novel work. If you have made something cheaper, faster, smaller, larger or longer then it could count as R&D. Similarly, if you have duplicated a product, process or service and improved it in the process then this could also be eligible.
Companies can claim R&D tax credits for their revenue expenditure on:
- Staffing costs for R&D employees
- Paying an external staff provider for R&D
- Materials for R&D
- Water, fuel and power
- Software directly used in the R&D process
- Subcontracting out R&D activities (beware for large companies)
R&D tax relief consultancy from Abbey Tax
Many companies are reluctant to find out whether they qualify for R&D due to the possibility of spending significant amounts of time and money. The process is often perceived as challenging, however our tailored approach combined with our expertise ensures seamless liaison with the tax authorities. Our guidance and specialist knowledge allows you to present an accurate and valuable R&D claim to HMRC.
We can look at past, present and future development activity to maximise your opportunities across these government initiatives.
Find out more about R&D tax credits here. Alternatively, if you think you may be eligible and would like to arrange your free pre-qualification healthcheck then call 0114 236 4457.