What is a research and development (R&D) tax credit?
R&D is a corporation tax relief that may reduce your company’s tax bill, or even provide a cash rebate to enhance further development. This tax relief can only be claimed if your company is liable for UK Corporation Tax.
The way you claim tax relief depends on the size of your company. There’s the Small or Medium-sized Enterprise scheme and the (less generous) Large Company scheme.
Your company can only claim for R&D tax relief if an R&D project seeks to achieve “an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty”, and not simply an advance in its own state of knowledge or capability.
As you might expect, this explanation can raise more questions than it answers, which is why many companies choose to employ the services of an expert, experienced in making many similar claims, to assist them.
The project must relate to your company’s trade. This can be either an existing one, or one that you intend to start up based on the results of the R&D you have undertaken.
If your company is claiming tax relief under the small company scheme it must own any intellectual property that might arise from the project in order to claim HMRC R&D Tax Credits.
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How to make a successful claim
If your company is (or has) faced:
Uncertainty due to the complexity of the product, software or system being designed and built.
Assembled a number of components (or software sub-programs) in a novel way or non-standard pattern.
Worked on combining standard technologies, devices and/or processes in a novel way, even if the principles for their integration are well known.
Then there is likely to be (what HMRC term) “scientific or technological uncertainty” and the company is most likely eligible to claim R&D Tax Relief.
Based on our experience, many entrepreneurs start scratching their heads when considering whether their work falls within this definition, so that’s why we always ask companies to ask us for our opinion as we have experience of making similar claims.
What does it cost and what’s involved?
We provide a complete R&D Tax Credits service, which includes completion of all of the steps set out below, for either a fixed fee or, if you prefer, a percentage of the tax rebate which is only payable in the event that a successful claim is made.
With Metric you’ll be best placed to make a successful R&D claim because we have a well-established track record of helping Innovative companies, so you’ll receive expertise and advice that’s 100% relevant to your business.
What could your company receive as a cash payout?
Where a company makes a net loss for corporation tax purposes, the amount of the loss can be cashed in (or “surrendered”) to HMRC in return for a cash credit, which can be worth as much as 33.4p for each £1 of R&D expenditure.
This is the best option for cash-strapped companies and start-ups.
Alternatively, carry this loss forward to offset against future profits and the tax saving could be worth 46p for each £1 of R&D expenditure.
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