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Lets see if you qualify with the HMRC R&D incentive.

We offer a free consultation to see if you are eligible for a claim and the process involved in claiming your tax credit.

HMRC Explains R&D Tax Credits

R&D Claims Process

Understanding our easy tax advisory service can help you claim

Introductory Call or Meeting
1

Introductory Call or Meeting

A fully trained R&D Finance Analyst will take 10 minutes of your time gathering preliminary information to see if your company is eligible for an R&D tax credit.

Technical Specification Report
2

Technical Specification Report

Once we have gathered sufficient information which will allow us to draft a technical project report we will provide an accurate identified benefit.

Submitting your claim to HMRC
3

Submitting your claim to HMRC

Once the claim application is complete we will walk you and your accountant through the process of updating HMRC. We have had 100% success rate with all our claims.

Receiving your R&D Tax Credit
4

Receiving your R&D Tax Credit

HMRC typically issue their R&D benefit within 28 days of submission. This is dependent on the number of applications and how quickly they work through the backlog. Be excited, reinvest, expand, hire or train more staff, use the initiative to grow your business!

SME R&D
RDEC R&D
Large Company R&D
Patent Box
Creative Tax Relief
SME R&D

SME - R&D Scheme

SME:

Small and medium sized enterprises (SME) R&D Relief You can claim SME R&D relief if you’re a SME with: less than 500 staff a turnover of under 100 million euros or a balance sheet total under £85 million pounds. You may need to include linked companies and partnerships when you work out if you’re a SME. 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 claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss

RDEC R&D

RDEC - R&D Scheme

Overview

R&D expenditure credit (RDEC) replaced the large company scheme in April 2016.

RDEC can also be claimed by small and medium-sized enterprises (SMEs) who have been subcontracted to do R&D work by a large company or who have received a grant or subsidy for their R&D project.

You might do this as a SME if you cannot claim R&D tax relief for SMEs.

The credit is calculated at 12% of your company’s qualifying R&D expenditure (this rate applies to expenditure incurred on or after 1 January 2018) and is taxable. Depending if your company is profit or loss making the credit may be used to discharge the liability or result in a cash payment.

You must meet our definition of R&D to get RDEC.

Costs you can claim

You can claim costs on the project from the date you start working on the uncertainty until you develop or discover the advance, or the project is stopped.

Staff costs

For staff working directly on the R&D project, you can claim a proportion of their:

  • salaries
  • wages
  • Class 1 National Insurance contributions
  • pension fund contributions

You can claim for administrative or support staff who work to directly support a project (for example, specialist cleaning staff). You cannot claim for clerical or maintenance work that would have been done anyway, like managing payroll.

You can claim 65% of the relevant payments made to an external agency if they provide staff for the project.

Subcontractor costs

Subcontracted expenditure cannot be claimed unless it is directly undertaken by:

  • a charity
  • a higher education institute
  • a scientific research organisation
  • a health service body
  • an individual or partnership of individuals

Consumable items

You can claim for all consumable items used up in the R&D. This includes:

  • materials
  • utilities

Costs that cannot be claimed

You cannot claim for:

  • the production and distribution of goods and services
  • capital expenditure
  • the cost of land
  • the cost of patents and trademarks
  • rent or rates

Work out the period you can apply relief for

The project starts when you begin working to resolve the uncertainty. You will need to identify the technical issues that need to be resolved, and make sure there is not an existing solution that has already been worked out.

The project ends when you solve the uncertainty or stop working on it. The period you claim R&D expenditure credit for should end once you have a working prototype that solves the problem, and before you go into production.

Your R&D may restart if you find another scientific or technological uncertainty after you have started producing the product. If this happens, you can claim for another period of R&D while you try to resolve it.

You can make a claim up to 2 years after the end of the accounting period it relates to.

How to calculate RDEC

To calculate your expenditure you need to:

  1. Work out the costs that were directly attributable to R&D.
  2. Reduce any relevant subcontractor or external staff provider payments to 65% of the original cost.
  3. Add all costs together.
  4. Multiply the figure by 12% to get the expenditure credit.
  5. Enter this figure into your tax return.

How to claim RDEC

Claim the credit by entering your expenditure into the full Company Tax Return form (CT600).

If your claim covers a period of 12 months or more, submit a separate claim for each accounting period.

You can send more information to HMRC online to support your claim.

To support your claim online, you need a Government Gateway user ID and password. If you do not have a user ID, you can create one the first time you use the service.

What you will need to provide to support your claim

You will need to provide a short summary that explains how your project:

  • meets our definition of R&D
  • looked for an advance in science or technology and aimed to achieve this advance
  • had to overcome scientific or technological uncertainty, and how you overcame this uncertainty
  • could not easily be worked out by a professional in the field

If you are claiming the credit on:

  • one to three projects, you must include details of all projects
  • 4 or more projects, you must include detailed descriptions of at least 3 projects ( up to a maximum of 10), which between them cover 50% or more of your total qualifying R&D costs

You will also need:

  • the start and end dates of the accounting period relating to the R&Dactivity - these should be the same dates as the period covered by your CT600 return
  • your Unique Taxpayer Reference (UTR) number
  • details of your qualifying R&D costs

When you cannot use the online service

If you need to send supporting information for more than 10 R&D projects which cover at least 50% of your total qualifying RDEC costs, you need to either:

How to apply the credit

You must complete the following steps to apply RDEC:

  1. The credit must be used to settle your Corporation Tax liability for the accounting period. However, you’ll need to pay Corporation Tax on the credit. If the credit means you are due a repayment for Corporation Tax that has already been paid, the interest will be calculated on a last in, first out basis.

  2. If you have RDEC remaining after step 1, the amount is reduced by applying a notional tax charge to it. The notional tax charge must be based on the main rate of Corporation Tax for the accounting period. If the amount remaining after step 1 is higher than what the value of the total credit minus the notional tax charge would have been, you must use the value of the total credit minus the notional tax charge in step 3.

  3. The credit must not be higher than your company’s total expenditure on R&D workers’ PAYE and National Insurance contributions for the accounting period. The amount over this limit will be added to any expenditure credit in the next accounting period.

  4. The remaining amount is used to pay any outstanding Corporation Tax liabilities for any accounting periods.

  5. The credit can be surrendered in whole or part to any group member.

  6. The credit can be used to discharge any other company liabilities, like VAT or liabilities under a contract settlement.

  7. The final amount can be paid to your company.

 
Large Company R&D
All sorts of activity can qualify

Large Company - R&D Scheme

Large Company

A Large company is a company that is not an SME.

R & D Enhancement Credit

George Osborne renamed the ‘Above the Line’ tax credit scheme for Large companies, announcing the arrival of the ‘R & D Enhancement Credit’ from 01 April 2013. The scheme is voluntary until April 2016 and follows a considerable period of consultation with affected companies and HMRC. Broadly the scheme facilitates a taxable 10% credit to appear above the line and generate a cash repayment for eligible expenditure.

The Legacy ‘Large Company R & D Scheme’, Part 13, Chapter V, CTA 2009

This scheme runs alongside the RDEC scheme until April 2016, with the latter providing transitional and actual reliefs for Large companies wishing to claim the new credit.
The Old Scheme provides a tax uplift mechanism of 130% of the eligible R & D spend and contributions to independent research.
Whether a company should choose the Old or New Scheme will be governed by the wider group position and the need for more immediate ‘cash’ flow or the possibility of immediate future changes in the claimant’s trading activities.

Patent Box
All sorts of activity can qualify

Patent Box - R&D Scheme

Overview

The Patent Box enables companies to apply a lower rate of Corporation Tax to profits earned after 1 April 2013 from its patented inventions. The relief will be phased in from 1 April 2013 and the lower rate of Corporation Tax to be applied will be 10%.

This guidance only refers to patents but your company may also benefit from the Patent Box if it holds certain other medicinal or botanic innovation rights.

Who can benefit

You can only benefit from the Patent Box if your company is liable to Corporation Tax and makes a profit from exploiting patented inventions.

Your company must also own or exclusively license-in the patents and must have undertaken qualifying development on them.

If your company is a member of a group, it may qualify if another company in the group has undertaken the qualifying development.

Which patents are eligible and what must be done with them

You can benefit from the Patent Box if your company owns or exclusively licenses-in patents granted by the:

  • UK Intellectual Property Office
  • European Patent Office
  • following countries in the European Economic Area:
    • Austria
    • Bulgaria
    • Czech Republic
    • Denmark
    • Estonia
    • Finland
    • Germany
    • Hungary
    • Poland
    • Portugal
    • Romania
    • Slovakia
    • Sweden

Your company or another group company must also have undertaken qualifying development for the patent by making a significant contribution to either:

  • the creation or development of the patented invention
  • a product incorporating the patented invention

Groups of companies

If your company is a member of a group, it must also actively own the patented invention by taking a significant role in managing its whole portfolio of eligible patents.

Your company doesn’t have to make all the decisions regarding the portfolio, but it must undertake a significant amount of the management.

Exclusively licensing-in patents

Patent holders may wish to license their inventions for others to develop. If your company holds licenses to use others’ technology it may still be able to benefit from the Patent Box. But to do so it must meet all of the following conditions.

It must have:

  • rights to develop, exploit and defend rights in the patented invention
  • one or more rights to the exclusion of all other persons (including the licensor)
  • exclusivity throughout at least an entire national territory - rights to manufacture or sell within part of a country, for example, would not qualify as exclusive

Also, the licensee must either be able to bring infringement proceedings to defend its rights or be entitled to most of the damages awarded in successful proceedings relating to its rights.

The exclusive licensing conditions are relaxed for groups of companies. This recognises that one company in the group may own a portfolio of patents while another exploits them.

Income earned from exploiting patented inventions

Not all of your company profits may come from exploiting patented inventions. To be relevant IP (intellectual property) income, it must come from at least one of the following:

  • selling patented products - that is sales of the patented product or products incorporating the patented invention or bespoke spare parts
  • licensing out patent rights
  • selling patented rights
  • infringement income
  • damages, insurance or other compensation related to patent rights

Your company can also benefit from the Patent Box if it uses a manufacturing process that is patented or provides a service using a patented tool. In these circumstances, you will need to calculate a notional royalty.

How and when to claim

You have to make an election to benefit from the reduced rate of Corporation Tax that applies to the Patent Box. You can do this in the computations accompanying your Company Tax Return or separately in writing. There is no special form of words for this election. You must make your election within 2 years after the end of the accounting period in which the relevant profits and income arose.

The full benefit of the regime will be phased in from 1 April 2013. You will need to apply an appropriate percentage to the profits your company earns from its patented inventions.

The appropriate percentages for each financial year are:

  • 1 April 2013 to 31 March 2014: 60%
  • 1 April 2014 to 31 March 2015: 70%
  • 1 April 2015 to 31 March 2016: 80%
  • 1 April 2016 to 31 March 2017: 90%
  • from 1 April 2017: 100%

There is no box on the Company Tax Return for making the election. Instead you apply the reduced 10% rate by subtracting an additional trading deduction from your Corporation Tax profits. This is calculated using the following formula:

RP × FY% × ((MR - IPR) ÷ MR)

In the formula:

  • RP is the profits of a company’s trade relevant to Patent Box
  • FY% is the appropriate percentage for each financial year
  • MR is the main rate of Corporation Tax
  • IPR is the reduced rate of 10%

This approach is used to avoid complications if you claim losses or other reliefs. So before you can calculate the deduction, you must calculate the amount of your profits that qualify for Patent Box.

Examples

If a company has trade Corporation Tax profits of £1,000 in the financial year from 1 April 2015, which qualify in full for the Patent Box, and the main rate of tax is 22%, then instead of arriving at a tax charge of £100 by multiplying £1000 by 10%, the calculation is:

Calculation Amount
Profits chargeable to Corporation Tax £1,000
Patent Box deduction = £1000 × 80% ((22 - 10) ÷ 22) £436
Profits chargeable to Corporation Tax £564
Tax payable = £564 × 22% £124

Where your company’s accounting period falls within more than one financial year you will need to apportion the profits your company earns from its patented inventions in that accounting period to each financial year.

For example, a company has trade Corporation Tax profits of £1,000 in the year ended 31 December 2016 which qualify in full for the Patent Box, the profits are apportioned as follows:

Profits falling in financial year 2015 (1 January 2016 to 31 March 2016) 91/366 × £1,000 = £249 Profits falling in financial year 2016 (1 April 2016 to 31 December 2016) 275/366 × £1,000 = £751

Calculation Amount
Profits chargeable to Corporation Tax £1,000
Patent Box deduction = (£249 × 80% + £751 x 90%) × ((22 - 10) ÷ 22) £478
Profits chargeable to Corporation Tax £522
Tax payable = £522 × 22% £114

Answers to your Patent Box questions

There are specialist R&D Relief units located throughout the UK who are able to assist you with your claim. These units are organised on a geographical basis, dealing with claims from companies whose main research and development base is within their postcode allocation. These units will also answer your Patent Box questions. You can contact them before making a claim or while you are putting together your claim.

In addition, HM Revenue and Customs (HMRC) are currently creating a free pre-recorded ‘webinar’ that provides an overview of the Patent Box, it is hoped this will be released shortly.

But if your company’s tax affairs are handled by a Customer Relationship Manager or Customer Coordinator in the HMRC Large Business Service or in the Large and Complex teams, you should contact your Large Business Service or Large and Complex office direct.

 
Creative Tax Relief

Creative Tax Relief - R&D Scheme

SME:

Small and medium sized enterprises (SME) R&D Relief You can claim SME R&D relief if you’re a SME with: less than 500 staff a turnover of under 100 million euros or a balance sheet total under £85 million pounds. You may need to include linked companies and partnerships when you work out if you’re a SME. 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 claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss

 

Knowledgebase

FAQ's - Common questions and answers

HMRC endeavour to settle most claims in approx. 28 days following submission, although this can take longer if a claim is not well presented and supported.

Our specialists understand the scheme in its entirety and will help you to establish whether you have an eligible R&D claim. If you are eligible, we will manage your R&D recovery and ensure all eligible costs are included.

Our Fee is only due upon your successful claim We carry out the whole process for FREE and supply your accountant with the claim details ready for submission to HMRC – and then only charge a Success Fee of 25% when your first claim has been approved (20% for future years – as most companies can claim each year).

Companies from most industry sectors have made successful recoveries. Providing you are a UK Ltd company and are fixing a problem in a novel way, you’re likely eligible.

It is an incentive set up by HMRC in 2000 to stimulate growth and innovation within the UK economy. It is aimed at UK limited businesses from start-ups to established companies to encourage growth through a potential tax refund / tax credit for any development work carried out. The teams at Counting King & RDS work with you to establish if you are eligible for this incentive from HMRC (with no upfront fees).

To stimulate economic growth and investment in R&D, therefore increasing tax revenue. HMRC have calculated for every £1 they give to companies investing in Research and Development, they will indirectly receive between £1.53 to 2.35 in tax revenue. It benefits the economy and makes sound economic sense.

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AGRICULTURE, FORESTRY, FISHING

Developing more environmentally friendly pesticides.
Utilising existing technologies, such as drones, to improve the efficiency of routine processes.
Creating a method to optimise crop yield.

Average Claim

£48,780

MINING & QUARRYING

Developing a remote-controlled mining technology.
Creating a biomining bacteria.
Improving the efficiency of an excavating machine.

Average Claim

£83,000

MANUFACTURING

Creating a fully compostable range of wipes.
Developing a new method of waterproofing a material.
Implementing automated systems to speed up production.

Average Claim

£47,016

Electricity, Gas, Steam &Air Conditioning

Improving efficiency of lighting installations.
Developing a smart electric vehicle unit to improve charge time.
Designing a more environmentally friendly battery.

Average Claim

£76,923

Water Sewage & Waste

Developing an improved biological filter.
Creating a fire and corrosion resistant flood defence door.
Designing an innovative odour suppression unit for sewage works.

Average Claim

£52,632

Construction

Developing a method of making buildings more resistant to earthquakes, storms and other natural events.
Improving the energy efficiency of a building.
Increasing the durability of materials that protect the exterior of a building.

Average Claim

£48,246

Wholesale & Retail Trade, Repairs

Creating an e-commerce platform that provides a more personalised experience.
Adapting cameras to identify gender, age and height to display personalised adverts.
Implementing an automated system to optimise stock management.

Average Claim

£33,693

Transport & Storage

Developing a precise logistical tracking platform.
Creating more environmentally friendly packaging.
Implementing an efficient way of recycling pallets.

Average Claim

£37,736

Accommodation& Food

Developing “free from” recipes.
Designing machinery to automate the production of food.
Implementing new flavours to subsequently develop unique taste profiles for chocolate.

Average Claim

£76,923

Information & Communication

Developing a unique CMS platform.
Improving IT infrastructure security by integrating new technologies.
Creating and optimising an innovative AI to oversee an e-commerce platform.

Average Claim

£55,978

Financial& Insurance

Creating telematic technology to reduce insurance premiums.
Developing a new automated marketplace for renewable energy assets.
Designing a power management device to optimise energy consumption and minimise utility bills.

Average Claim

£72,165

Real Estate

Adapting VR to enable the showcasing of property.
Developing more efficient heat retention technologies.
Creating a platform that connects landlords with tenants to improve property management.

Average Claim

£37,037

Professional Scientific & Technical

Developing a unique paint, able to adhere in unpredictable environments.
Consolidating a range of unique insecticides into a single product.
Utilising CRISPER to achieve new gene splices.

Average Claim

£71,649

Admin& Support Services

Creating a system that automatically controls visitor access to certain areas.
Designing a system that can track a visitor’s arrival schedule based on GPS location.
Developing an integrated internal HR platform.

Average Claim

£51,813

Education / Training

Designing a platform to speed up the learning and invigilating process for a course.
Creating a highly personalised learning platform and experience.
Developing a technology to speed up the process of marking work.

Average Claim

£28,986

Health & Social Work

Developing connected wearable devices to monitor vital signs.
Creating cheaper and stronger prosthetics.
Designing non-irritant, long-lasting adhesive patches for medical devices.

Average Claim

£34,483