How To Claim R&D Tax Relief
We developed a unique approach to creating an R&D Tax Relief Claim. It is recognised by HMRC, and flexible enough to be tailored to each of our client’s needs. We developed this process with time management in mind, taking minimal time from the client. It is a highly successful process, with a 100% success rate.
How to Start an R&D Tax Relief Claim
Step 1 – Initial Consultation
The first step of the process, involves a quick 10-minute phone call with one of our Tax Consultants, which will reveal if you are eligible to initiate an R&D Tax Relief claim.
Step 2 – Client Instruction Form
This gives us permission to dig a little deeper, utilising our expert case management team to validate the potential qualifying criteria. Our vast client-base creates great opportunity for cross checking and internal compliance.
Step 3 – Tech Call
You will receive a 30 minute call from one of our Research Analysts in order to discuss your R&D activity in more detail. We can then determine whether the claim is worth pursuing, to ensure we do not take up any more of your valuable time if it is not financially beneficial for you.
Step 4 – Consultation & Audit
Our specialist auditors will use their experience and case precedence to advise you on what is claimable. Most clients are pleasantly surprised as to what qualifies as claimable expenditure for R&D Tax Relief. We will speak to the right people within your business to uncover all R&D activity; enabling us to maximise your claim by identifying all qualifying embedded costs, leaving no stone unturned!
Step 5 – Our Key Output
After receiving all required information, our expert team compile the technical justification document. Whilst being complied, you can rest assured knowing that your R&D Tax Relief Claim is being finalised in the best possible shape. A detailed report is written and constructed in accordance with HMRC best practices to ensure a smooth journey with their processing department. The report is then sent directly to you for acceptance before submission.
Step 6 – Claim Approved! Client Receives Their Benefit
HMRC process the R&D Tax Credits Claim and issue a rebate in approximately 28 days. Our clients receive their reward for their investment in innovation, paid out as quick as two weeks from submission as our methods are approved and recognised by HMRC. This process generally takes approximately 8 weeks from start to finish, with the average time of client involvement minimized to only 3 hours, thanks to our streamlined process.
What is the criteria for R&D eligibility?
The two key criteria in determining whether an innovative company is eligible for R&D tax relief are ‘advancement’ and ‘uncertainty’. To learn more you can check out the 5 criteria for R&D Tax Relief eligibility here. To find out if you are eligibile for R&D tax credits take the Eligibility Quiz today!
What Expenditure is qualifying?
If your company and project both meet the necessary criteria, then it is possible to claim relief on revenue expenditure, and in some cases also capitalised revenue expenditure, across three main areas; staff costs (gross salary, employers NIC, pension contributions etc), subcontractors/freelancers and consumable items (i.e. heat, light & power, materials and equipment ‘used’ and/or ‘transformed’ by R&D process).
Are we eligible for R&D Tax Relief?
Many business owners and finance departments will wonder ‘are we eligible for R&D tax credits?’ The answer is often yes. If your company is taking a risk by innovating, improving or developing a process, product or service, then it can qualify for R&D Tax Relief Claim. It’s rare to find a business where all the R&D activity is transparent, neatly housed within easily identifiable job roles and functions. We tend to find it’s more typical that R&D functions will be spread across numerous aspects of the organisation, while some individuals playing a far more active role.
We often start by working with clients to identify the specific job roles within a business, and attributing a percentage of their time as qualifying R&D expenditure. As a result it’s not uncommon for us to find a Web Developer, Systems Engineer, Technical Director, Product Designer or CEO that is more involved in day-to- day R&D activity than even a dedicated R&D Manager might be.
How are the R&D Tax Credits calculated?
For SMEs, from 1 April 2012, the R&D Tax Relief claim enhancement (the enhanced deduction) was increased to 225% of the qualifying expenditure for R&D Tax Credits incurred. Therefore, where an SME incurs expenditure of £100,000 on qualifying R&D, it can deduct £225,000 when calculating its taxable profit, or loss, for corporation tax purposes. As the £100,000 would already be accounted for in its accounts, the balance of £125,000 would be an additional deduction from its taxable profit and the corporation tax saving would be £25,000 (at a corporation tax rate of 20%).
The equivalent of the company receiving 25p from HMRC for every £1 they spent on R&D activities. From 1 April 2015, the enhanced deduction was increased further to 230% of the qualifying R&D expenditure incurred. Using the same example as above, the additional deduction is therefore increased to £130,000 and the corporation tax saving is also increased to £26,000 (at a corporation tax rate of 20%). See calculator
Can you claim R&D Tax Relief if you are unprofitable?
A common misconception about tax credits is the idea that you have to be profitable for them to be worthwhile. That has been false for many years now. In fact, the SME scheme used to be much more favourable to loss-making SMEs than profitable ones (25% vs. 15% return). Over the last couple of years, the schemes have become more equal, and now both profitable and unprofitable companies can get up to 25% return.