R&D tax credits are an enhanced company tax relief for research and development costs, resulting in a tax reduction or a lump sum payment. If you run a limited company and it has been working on a project that seeks to achieve a technological, scientific or industrial advancement that isn’t already being done by others, then you could be eligible for R&D relief.

What can be claimed?

SMEs can deduct up to 230% of eligible R&D expenses from their taxable profits. Loss-making companies can claim a tax credit calculated at 14.5% of the eligible R&D claim subject to some possible restrictions included in the rules.

Requirements for R&D claims

The project aims to seek advancement in science or technology.

It must relate to the company’s current trade or one that it intends to commence if the results of the R&D are positive.

There should be uncertainty that the project will be successful at the outset, and the company needs to explain how the uncertainties are to be overcome. There is a further requirement that the uncertainties could not be readily resolvable by a competent professional working in that field.

What expenditure qualifies?

• Staff costs. Agency worker staff costs are restricted to 65%.
• Consumables
• Software
• Subcontracted R&D costs, restricted to 65% of costs
• Costs of clinical trial volunteers

Claims

A claim can be made to HMRC within two years of the accounting year-end date. HMRC aims to review claims within 28 days of submission.