Is my business eligible for R&D tax credits?
Who qualifies for R&D tax credits?
What counts as R&D?
The HMRC R&D criteria are purposefully broad. Whatever size or sector, if your company is taking a risk by attempting to ‘resolve scientific or technological uncertainties’ then you may be carrying out qualifying activity. This could include:
Creating new products, processes or services.
Changing or modifying an existing product, process or service.
If you’re not sure if your project is possible, or you don’t know how to achieve it in practice, you could be resolving technological uncertainties and be carrying out qualifying R&D.
Within the government’s accepted research and development definition, R&D doesn’t have to have been successful to qualify. You can also include work undertaken for a client, as well as your own projects. Further detail is available in our KnowledgeBank article: How do I know if I’m carrying out qualifying R&D?
What costs qualify for R&D tax credits?
When putting together an R&D tax credit claim, we look for the following types of R&D qualifying expenditure:
- Staff, including salaries, employer’s NIC, pension contributions and reimbursed expenses.
- Subcontractors and freelancers.
- Materials and consumables including heat, light and power that are used up or transformed by the R&D process.
- Some types of software.
- Payments to the subjects of clinical trials.
Read our article for more on what qualifies for R&D tax credits >
What R&D tax credit scheme is right for my business?
What scheme you use to make an R&D tax credit claim will largely depend on whether you are an SME or a large company.
Fewer than 500 staff and either not more than €100 million turnover or €86 million gross assets. (Most companies, including start-ups, fall into this category.)
500 staff or more and either more than €100 million turnover or €86 million gross assets.
If you are classed as an SME for R&D tax credit purposes, your next step will be to make a claim via the SME R&D tax credit scheme. And if you are a large company, via the Research and Development Expenditure Credit (RDEC).
However, there are a few factors like grants and subcontracting that can restrict an SME from accessing the SME scheme. This means you may need to make a claim via RDEC – or via both schemes.
We help SMEs across all sectors receive millions of pounds every month to re-invest back into their businesses. It is possible to make use of R&D tax credits and grant funding together by using both schemes to ensure maximum value.
R&D tax credit schemes
|Who you are:||SME R&D tax credit scheme||RDEC|
|SME||Yes||Yes - sometimes|
Our team of chartered tax advisers save you time by preparing a robust R&D tax credit claim that uncovers all of your qualifying R&D activity and costs.Find out more about ForrestBrown's R&D tax credit process
R&D tax credit rates
SMEs are able to claim up to 33p for every £1 spent on qualifying R&D activities. The average claim made by SMEs in the UK is £53,876 (2016-17).
Large companies are able to claim up to 10p for every £1 spent on qualifying R&D activities. The average claim made by large companies in the UK is £272,881 (2016-17).
The R&D tax credit rates 2018 are show in the table opposite.
See how much your business could potentially claim below.