R&D Relief

R&D tax reliefs support companies that work on innovative projects in science and technology.

What counts as R&D?

To qualify for R&D the work you are carrying out must be part of a specific project to make an advance in science or technology (social sciences like economics and theoretical fields like pure maths are not included).

This could be either by creating new products/processes/services or by changing or modifying existing products/processes/services. The project must relate to your company’s trade – either an existing one, or one that you intend to start up based on the results of the R&D.

To get R&D tax relief you need to explain how a project:

  • looked for an advance in science and technology
  • had to overcome uncertainty
  • tried to overcome this uncertainty
  • couldn’t be easily worked out by a professional in the field.

Within the accepted HMRC research and development definition, R&D doesn’t have to have been successful to qualify.

Types of R&D tax relief

There are different types of R&D tax relief depending on the size of your company. Most companies fall into the small and medium sized enterprises:

  • less than 500 staff
  • turnover of under €100m or a balance sheet total under €86m.

SME R&D relief allows companies to:

  • deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction (so an extra 33p for every pound spent on R&D).
  • claim a tax credit (cash benefit) if the company is loss making, worth up to 14.5% of the surrenderable loss.

 What R&D costs can you claim?

The following types of expenses can all qualify for R&D expenditure:

  • Employee salaries, employers NIC and pension contributions
  • Subcontractors/freelancers
  • Materials and consumables including heat, light and power
  • Certain types of software

If you believe you could be carrying out work that would qualify for R&D tax relief or would like any further clarification please do not hesitate to contact us.