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Research And Development Tax Credits

By admin
02 Jul 2018
Manage Tax Risk

Why Edge Tax?

We are a specialist practice dealing with specific areas of tax consultancy and managing tax disputes. We support firms of accountants, financial advisers and solicitors to provide full advice to their clients. We adopt a commercial approach and are always happy to discuss whether we can add value with no obligation.

We provide fixed fee quotes.

Our research and development tax credits service:

Stage One: Initial review to establish what relief may be claimed on and potential quantum of relief

Stage Two: Full analysis and preparation of R&D claim

Stage Three: Submission and correspondence with HMRC to agree and process the R&D claim

What are Research and Development (“R&D”) tax credits?

Research and development tax credits were introduced by the Government to encourage UK companies to invest in innovation. A company that incurs expenses on developing new products, processes and services or enhancing existing ones may be eligible for a cash incentive or reduction in corporation tax. The amount of tax credit may be up to 33% i.e. 33p for every £1 of qualifying expenditure.

An eligible company can typically claim relief for the past two accounting periods.

Qualifying expenditure is identified and enhanced by the relevant rate (see below) to produce an enhanced expenditure. The enhanced expenditure is used in the tax computations to reduce profits and corporation tax or create a loss for onward relief.


What counts as R&D?

For tax purposes, HMRC R&D requirements 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:

  • Creating new products, processes or services

  • Changing or modifying an existing product, process or service

This means that if you’re not sure your project is scientifically or technologically possible, or you don’t know how to achieve it in practice, you could be resolving uncertainties and therefore qualify for research and development tax credits.
Within the accepted HMRC 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.

What R&D costs can I claim for?

When putting together a research and development tax credit claim, we look for the following types of qualifying R&D expenditure:

  • Expenditure on staff including salaries, employer’s NIC and pension contributions

  • Expenditure on subcontractors and freelancers

  • Expenditure on materials and consumables including heat, light and power that are used up or transformed by the R&D process

  • Expenditure on some types of software

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