FAQs

General

• How do I know what qualifies for tax relief and what is everyday problem solving?

  R&D exists for certain situations that challenge a competent professional in their day-to-day work. R&D tax relief supports companies that work on innovative projects in science and technology, where the following criteria are met:

  • looked for an advance in the field
  • had to overcome the scientific or technological uncertainty
  • tried to overcome the scientific or technological uncertainty
  • could not be easily worked out by a professional in the field

   

  The project may research or develop a new process, product or service or improve on an existing one.

  As you can see, the HMRC definition of R&D is not aligned with the traditional definition, which is why we recommend you speak to a specialist before preparing a claim.

• Do you have a minimum fee?

  Yes, we do have a minimum fee of £4,000 per claim. Alongside this, our total overall fees are calculated based on the number of projects and the level of qualifying expenditure.

• Do projects carried out overseas qualify?

  The location of the R&D activity doesn’t currently affect a company’s eligibility for R&D tax relief. If the company is paying UK corporation tax, it may incur qualifying costs that are linked to overseas R&D activities. However, this is set to change from 1st April 2024, after which most overseas expenditure will no longer be eligible.

• Can I claim if my project wasn’t a success?

  Yes, the purpose of the scheme if to reward innovation, not just successful or completed projects. The claim is based on the investment the company made towards technological or scientific advancements and it is the intent that matters.

• Can I claim for R&D if I’m loss making?

  Yes you can. The scheme is designed to help anyone who’s incurred R&D expenditure.  If you’re a loss making business, you could receive a cash repayment.

• Can individuals, sole traders, LLP’s or charities apply for R&D tax credits?

  Unfortunately not. Only limited companies liable for Corporation Tax can claim through the scheme.

• Are R&D tax credits considered as government aid?

  The SME scheme is classed as a ‘notifiable State Aid’, so if you’ve already received a State Aid grant for the project you are claiming for, it may affect your claim. In this instance you would still be eligible to claim under the less generous RDEC scheme.

• Are HMRC likely to investigate and ask questions about my claim?

  An increasing number of claims become subject to an HMRC inquiry. Although not always the case, it is more likely to be where the technical report has not been prepared by a specialist with detailed knowledge of the scheme rules and HMRC’s definition of R&D for tax purposes. If your claim is investigated then we help all our clients prepare a defence, with no additional charge.

• When will I receive my R&D tax credits?

  HMRC aim to process all claims within 28 days of submission and it can take an additional 10 days for the actual payment to be received after processing. During peak times, these processing times have been known to extend, with 90 day processing times not being uncommon.

• How do I determine if I qualify under the RDEC, or the more generous SME scheme?

  In short a SME for R&D tax relief purposes is a company which together with other group and linked enterprises does not exceed:

  • 500 employees
  • €100m turnover
  • €86m gross assets
• When claiming staff costs, how would I quantify this and what evidence is required?

  HMRC would expect to see clear methodology behind your costs and the amount of R&D time attributed against staff salaries.

• How much can I claim under R&D tax credits?

  This is dependent on what type of costs your business has spent on R&D as different rates apply. For example subcontractor costs can only be claimed at 65% of the actual costs incurred, whereas salaries can be claimed at 100%.

  The cash benefit of a R&D claim varies dependent on if the company is loss making or profitable in the year.  On average the benefit received is 25% of the R&D project spend, however can vary between 10% and 33% if your company is loss making

• What if I’ve already filed my corporation tax return for that period?

  It doesn’t matter if your corporation tax return has already been filed as you can file an amended return (subject to the two year time limit). Filing an amended return actually speeds up the HMRC processing time.

• Is there a standard template or format that HMRC requires?

  As of the 1st August 2023, HMRC have introduced a standard additional information form, which must be submitted prior to any claim for R&D tax credits. Where this hasn’t been completed, HMRC will remove the R&D claim from the Corporation Tax computation.

• What documentation do I need to prepare if I submit myself?

  You’ll need to prepare a report detailing the nature of your project(s) and eligibility. This includes the advancements sought, the uncertainties in this area and why the knowledge sought wasn’t already deducible by a competent expert in the field. Your report will also need to detail the qualifying expenses and the calculation of the R&D tax relief sought.

• How are R&D tax credits paid?

  Depending on whether a company is profitable or not, R&D tax credits can be paid in one of three ways:

  • Corporation Tax rebate
  • Cash repayment
  • Enhanced expenditure deduction that a business may carry forward against future profits
• How far back can I claim R&D tax credits?

  HMRC allows businesses to claim for R&D tax credits up to two years after the end of the accounting period in which the R&D activity took place.