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.