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Research and Development Tax Credits – also known as ‘R&D Tax Credits’ are tax benefits available to businesses when they incur additional costs whilst building software, developing products or defining specific processes. Eligible businesses receive either a cash payment directly from HMRC or a deduction in their corporation tax.  

R&D Tax Credits explained

The research & development (R&D) tax credit was implemented to drive innovation and business development within specific businesses and companies around the UK who are focusing on research and development.

This great incentive is one of the UK government’s top incentives for businesses, aiming to create an increase in research and development and allows up to 33.35% of a company’s ‘R&D spend’  to be recovered either as a reduction in Corporation Tax or a cash repayment.

HMRC state close to £6.3bn in R&D tax credits were claimed for R&D costs incurred during 2018-19, corresponding to a whopping £35.3bn of R&D expenditure.

What companies are eligible for Research and Development Tax Credits?

The great thing about R&D Tax Credits, is that companies across all sectors may be eligible. 

In order to meet the eligibility criteria, the business must have undertaken ‘qualifying’ research and development activities. 

These include:

  • Creating new products, processes or services.
  • Changing or modifying an existing product or service.

What are the key benefits of R&D Tax Credits?

As with all types of tax credits, the R&D tax credits specifically are a great form of financial support for all businesses. They help companies to develop new, exciting and well-needed products, processes & services across all different industries across the UK. 

  • Cash Boost – a great way to inject some cash into businesses with a non-repayable, fund for many, no matter the size of the company. 
  • Growth – the cash boost enables some businesses to develop further towards other levels of funding as they develop the company. 
  • Innovate – the tax credits open up more opportunities for new developments and innovation within businesses. 
  • Global figureheads – with additional funding providing more growth opportunities, this enables UK companies to be at the forefront of R&D globally. 

Am I eligible for R&D Tax credits?

The eligibility is determined by a number of different factors. Usually, if your business is deemed to be risk-taking by developing processes, products and services – as well as clearly outlining innovation and improvement, you will likely qualify. 

If you and your team were unsure of outcomes when you first set out the project, without certainty of what would be achieved, this is a good indication that you may be eligible. 

If you can demonstrate that your project involves more than the application of existing technologies, then you may be eligible to make a claim.

HMRC do provide further information on their website.

How do I claim the tax credits? 

All R&D Tax credits are monitored and controlled by HMRC, you can submit a claim going back two accounting periods for the tax credits.

By producing an ‘R&D technical report’, you and your business are able to demonstrate the technology being used and implemented, the uncertainties this brings, what skills are required and at what cost this is to the business. 

It’s definitely worthwhile speaking to a specialist in this area to ensure all of the correct information is provided at the point of application. This will result in achieving the maximum amount of tax credits for your business. 

Speak to the team at Jaccountancy today if you have any questions around R&D Tax Credits –