Find Out If Your Company Qualifies For R&D Tax Relief

Research and development is important to every business industry, because it is how new products or new manufacturing methods are developed. Without R&D, people wouldn’t be talking on mobile phones, working on laptops in a café, or getting their energy from solar panels. However, R&D is expensive, and many businesses need monetary assistance of some kind to continue with research and development.

Research Grants

The government in the UK provides many R&D grants to businesses who are developing new technologies in certain fields. For instance, companies exploring green energy solutions can apply for grants to help them with their research. The government may also provide innovative businesses with monetary grants for coming up with forward-thinking projects to create new products, processes or services.

Tax Relief Schemes

Another way the government is helping businesses with their R&D expenses is by providing R&D tax relief. Businesses of every size can take advantage of tax relief schemes if they are responsible for paying corporation taxes. There are two tax relief schemes available, as follows:

  • Small or Medium-sized Enterprise Schemes
  • Research and Development Expenditure Credits

Small or Medium-sized Enterprise Schemes

To take advantage of the Small or Medium-sized Enterprise Scheme, or SME, a company must have fewer than 500 employees and meet the following criteria:

  • Have an annual turnover of less than €100 million
  • Have a balance sheet that reads under €86 million

These limits include any partnerships or linked or shareholding companies with at least a 25% stake in the company, as well as any company of which you own a 25% share.

Research and Development Expenditure Credits

There is no limit to the qualifying costs to participate in the Research and Development Expenditure Credit, or RDEC, scheme. A company who has qualifying R&D costs will receive tax relief amounting to 11% of the qualifying expenditures. Although subcontractors are not able to claim tax relief under the SME scheme, they can under the RDEC.

Claiming the Credits

To participate in one of these R&D schemes, your company must have made scientific or technological advances within their field. It is the type of advances that are important, and some of the key industries that can qualify for these tax credits include the following:

  • Software
  • Manufacturing
  • Land remediation
  • Aviation
  • Food and drink
  • Hospitality
  • Marine

Since understanding these schemes can be difficult, you should consult with the experts in the field. There are companies that offer tax consultancy services which can explain the schemes to you and help you find out if your company qualifies for them.

Qualifying Costs

Some of the qualifying costs for which you can receive the tax credit include the following:

  • Staffing costs, which includes both hiring staff involved in R&D and staffing providers
  • Consumable or transformable materials used for R&D
  • Paying trial clinic volunteers
  • Utilities like power, water or fuel that are used for R&D
  • Software needed for R&D purposes
  • Subcontracted expenditures for R&D
  • Capital expenditures like daily operational costs

Taking advantage of these schemes can help your business reduce its tax burden, leaving you with more money to put into further R&D, update your company’s equipment, or promote the innovations you’ve created.