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What are Tax Credits UK?

R&D tax credits explained

Rewarding innovation and fuelling growth, R&D tax credits have the power to transform your business.

What are R&D tax credits?

Research and development (R&D) tax credits are a government incentive designed to reward UK companies for investing in innovation. They are a valuable source of cash for businesses to invest in accelerating their R&D, hiring new staff and ultimately growing.

How do R&D tax credits work?

Companies that spend money developing new products, processes or services; or enhancing existing ones, are eligible for R&D tax relief. If you’re spending money on your innovation, you can make an R&D tax credit claim to receive either a cash payment and/or Corporation Tax reduction. The scope for identifying R&D is huge – in fact, it exists in every single sector. And if you’re making a claim for the first time, you can typically claim R&D tax relief for your last two completed accounting periods.

Who qualifies for R&D tax credits?

R&D can take place in any sector. It occurs in everything from cheese-making to chemical engineering, and construction to digital development.

What counts as R&D?

The HMRC R&D criteria are purposefully broad. Whatever size or sector, if your company is taking a risk by attempting to ‘resolve scientific or technological uncertainties’ then you may be carrying out qualifying activity. This could include:

lightbulb out of box

Creating new products, processes or services.

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Changing or modifying an existing product, process or service.

If you’re not sure if your project is possible, or you don’t know how to achieve it in practice, you could be resolving technological uncertainties and be carrying out qualifying R&D.

Within the government’s accepted research and development definition, R&D doesn’t have to have been successful to qualify. You can also include work undertaken for a client, as well as your own projects. Further detail is available in our KnowledgeBank.

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