What To Do When Making a R&D Tax Claim

23 November 2018
R&D Tax Claim

If you’re a company that likes to develop new products and services, you’re hopefully familiar with the HMRC’s R&D Tax Claim system. But if you aren’t, you could be spending way more than you need to on your research and development. So, how does it work? How can you claim it? Can your company claim it? Here’s what you need to know, and what you should do, when making an R&D tax claim.

What is a R&D Tax Claim?

Research & Development Tax Credits are a form of tax relief for companies that invest in innovative tech, products, services or processes. Whether it’s creating these things from scratch, or improving upon it, R&D Tax Claims can save companies a lot of money: up to 33p for every £1 of qualifying expenditure. If you can’t get a grant for innovation funding, or want to get the best of both worlds, you can use a R&D Tax Claim.

When Can I Claim It?

You have two years from the end of your accounting period to submit a research and development tax credit claim for any qualifying expenditure that you’ve identified during that period. This is because R&D Tax Claims are a form of Corporation Tax relief and the deadline for amending your Corporation Tax return is typically 24 months after the end of your accounting period.

What Counts As R&D and R&D Expenditure?

For tax purposes, HMRC’s R&D requirements are rather broad. Whatever size or sector, if your company is attempting to ‘resolve scientific or technological uncertainties’ then you are carrying out activity that qualifies as R&D. This could include:

  1. Creating new products, processes or services.
  2. Changing or modifying an existing product, process or service.

When putting together an R&D tax claim, we look for the following types of qualifying R&D expenditure:

  1. On staff: includes salaries, employer’s NIC and pension contributions.
  2. On subcontractors and freelancers.
  3. Expenditure on materials and consumables including heat, light and power that are used up or transformed by the R&D process.
  4. Expenditure on some types of software.

So, Should I Try an R&D Tax Claim?

Getting back a third of your expenditure seems like a sweet deal to us, particularly if you’re taking risks on R&D. If you think your company can take out a R&D Tax Claim or some other service, see if NWD Accountancy can help.