We’ve put together one place to find out about Research and Development (R&D) tax reliefs and how they can help your business.
Check quickly if you can claim
You can jump ahead to the sections you’re most interested in, using the links below:
What is R&D?
R&D reliefs support businesses that work on innovative projects. The reliefs are designed to encourage innovation and are a valuable source of cash for businesses to invest in accelerating their R&D, hiring new staff and ultimately growing.
Many businesses don’t realise that they qualify for R&D relief, or they are not claiming their full entitlement. It can be claimed by a range of companies that seek to research or develop an advance in their field. It can even be claimed on unsuccessful projects.
Who Qualifies for R&D?
R&D tax reliefs are only available for limited companies – sole traders and partnerships do not qualify. Companies claiming R&D reliefs must be able to demonstrate:
Types of R&D relief – the detail
What type of R&D relief you claim will largely depend on the size of your business.
Most of the claims we deal with come under the small and medium-sized enterprises (SME) R&D Relief.
You can claim SME R&D relief if your:
- team is under 500 people
- turnover is under 100 million euros or a balance sheet total of under 86 million euros
SME R&D relief allows you to:
- deduct an extra 130% of your qualifying costs from your yearly profit. This is as well as the normal 100% deduction, making the total deduction 230%
- claim a tax credit if your company is loss-making, worth up to 14.5% of the surrenderable loss
If you’re a large company, have been subcontracted by a large company or have received a government grant – you could qualify under a different scheme – the R&D expenditure credit. If you think this may apply to you, we will look at what scheme is best for you to claim under, please chat to us.
What can you do with the reclaimed costs?
According to HMRC’s latest R&D report, the average claim made by owner-managed businesses in the UK is £53,876. We’ve seen clients re-invest this in different ways to grow their businesses. You can:
Why work with the team at Wow
Working with Wow will significantly increase your chances of a claim being successful. We have a 100% record of claims being accepted by HMRC. We’ll also increase the value of any claim you make by:
- Using our knowledge to help identify qualifying projects and costs – some of which are sometimes overlooked
- Reviewing your financial information to make sure anything you’ve spent that qualifies for R&D tax relief is included
Have a chat to Rory to see how we can help you
Chat to Rory
In the words of a happy business owner
What types of projects/sectors qualify?
Below we’ve listed some common projects and sectors that qualify.
- Apps which have been custom-built
- Bespoke CRM/CMS systems for both internal and external use which help increase efficiently
- Appreciable improvements – if you’re making significant increases in technical performance. For example, decreasing web load time through more efficient coding and architectural design
- Building bespoke APIs or amending/developing existing APIs for specific integrations
- Natural language processing – speech to text software
- Machine learning – the utilisation of algorithms without specific human direction
- Deep learning – text and image recognition in computers or even driverless cars
- Neural networking – developing algorithms designed to operate in the same way as the human brain
- Challenging sites – overcoming uncertainties like site restrictions
- New materials
- Modular construction
- 3D printing
- CAD design and BIM modelling
- Energy-efficiency – development of energy-saving building designs, techniques and technologies
- Facade/cladding – research into new forms of cladding, particularly in relation to fire regulations
- Appreciable improvements to build techniques
- Development of new filming techniques, including custom-built filming rigs
- VR film production
- Hardware development
- Development of end-to-end encryption/biometric software to comply with privacy and security legislation
- Integrating new technologies with legacy systems
- Food manufacturing
- Processes designed to achieve a reduction in waste
- Prototyping/building of new products
- Pharmaceutical development and testing
- Replication of competitors existing project (if the know-how of how this was developed is not common knowledge or standard practice in the industry)
- Packaging development – the creation of new tamper-proof, waterproof or environmentally friendly packaging
See more in HMRC’s guide
How R&D can help during the uncertainty of COVID-19
If you find yourself in the position that you are still paying your team (not furloughing them), but you are short on new client work, you could consider getting your team to focus on new R&D projects.
Think about the things in your business you’ve wanted to develop for a long time, but keep deprioritising. Now’s a perfect time to pick them up. It could be:
- developing your internal systems
- creating a new bespoke platform
- designing a product that you could develop internally for future sale
Putting time into these projects now not only makes good use of your time or unexpected capacity, but it will also reap financial rewards for you further down the line. For every £1,000 you spend on a qualifying R&D project, you could receive anywhere from £250 £330 in additional future tax relief or tax rebates through an R&D claim. This could significantly improve your financial position in the future.