Shape Shape Shape Shape

Blog

£84 billion of R&D tax credits unclaimed by businesses – Check if you are eligible

Innovative businesses, both large and small, are hungry for funding to assist them as they emerge from lockdown and begin their recovery.

While the Government has offered several loans and grants to COVID-stricken businesses, there is an existing tax relief that remains largely unclaimed.

Data from HM Revenue & Customs (HMRC) analysed by tax reclaim specialists suggests that more £84 billion of Research and Development (R&D) tax credits have not been claimed, while it is estimated that around 80 per cent of eligible companies have either not claimed or have under-claimed. This is due to a misunderstanding into what business projects and expenditure can be claimed.

This tax relief allows SMEs to claim up to 33p for every £1 spent on qualifying R&D activities, while large companies using the Research and Development Expenditure Credit (RDEC) can claim up to 10p for every £1 spent on qualifying R&D activities.

Claims can even be made against projects that result in a loss or previous R&D activities in the last two years.

Eligibility

To benefit from R&D tax credits, you must:

  • Be a UK limited company that is subject to Corporation Tax.
  • Have completed qualifying research and development activities.
  • Have spent money on an eligible project.
  • Have incurred qualifying expenditure.

Businesses can claim R&D tax credits where they develop a new product, service or process or if they enhance an existing one.

When submitting an R&D tax credit claim, there is a wide variety of expenditure that can be covered including employment costs, subcontracted R&D work, software and consumable items used in the development.

When you deduct R&D expenditure from your taxable profits or add it to your losses you can benefit from a Corporation Tax reduction if you are profit-making, a cash credit if you are loss-making or a combination of the two.

Why aren’t more businesses claiming R&D tax credits?

Considering the availability of funding via this tax relief it may seem odd that more firms don’t make claims. The reasons why many businesses don’t utilise tax credits are often complex, but a key issue is that they do not believe they are eligible. If you wish for Daniel James Tax to check your Eligibility for free please call on 0161 9600 960 or complete this online form.

There is a common misconception that these tax credits are only available to firms in the most innovative of sectors such as IT and engineering. However, claims have been processed successfully for a wide range of sectors.

Think you might be eligible for a claim? Use the calculator below to calculate your R&D tax credit

 

Step 1 of 2: Your Claim Details

Company Name
Which scheme are you eligible for?
To select ‘SME scheme’ means your company has less than 500 employees and one of the following; Annual turnover not exceeding €100 million or balance sheet not exceeding €86 million. To select ‘Large Scheme’ also known as the ‘RDEC’ means your company has more than 500 employees and one of the following; Annual turnover exceeding €100 million or balance sheet exceeding €86 million.
Is the company profit or loss making?
What is your annual expenditure (before VAT) on staff, software and consumable items relating to R&D activities?
These include things such as - Staff costs include gross pay, NI ERS and company pension payments - Software license costs related to costs expensed to the P&L account and not treated as a fixed asset - Consumable costs related to items that are consumed or transformed during the R&D process such as materials, components, electricity and/or gas etc.
What is your annual expenditure (before VAT) on agency workers & sub-contractors who are involved with R&D activities (£)
Enter your sub-contracted costs that are directly related to R&D projects. This can include freelance sub-contractors that are actively involved in development activities as well as agency labour cost (which is restricted to 65% of the invoice value)