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R&D Tax Credits

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Are you looking to claim Research & Development credits for your company? Then continue reading as you may be able to claim on average £18,000 for more innovation.

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Why not contact us for your initial free consultation, where we can provide you with the most apt accountancy advice for your business. We aim to support you as well as keep you up to date on tax legislation and much more.

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R & D Tax Credits

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What are R&D tax credits?

Research and development (R&D) tax credits are a government tax relief that rewards innovative UK businesses. They were launched by the government in 2000 and provide a source of valuable cash for businesses to use towards developing new products and processes as well as expanding their teams, which in effect will enhance their growth.

How do R&D tax credits work?

Innovation is one of the most crucial drivers of the economy as it encourages the expansion of jobs, skills and business opportunities. By encouraging companies to boost innovation, the UK government is able to ensure a growth in our economy through an increase in employment opportunities and contribution to research and development.

Companies that spend money on innovation, whether they are developing new products and processes or existing ones, are in fact eligible for R&D tax relief. If a company is spending money on its innovation, it can make an R&D tax credit claim to receive either a cash payment and/or Corporation Tax Reduction.

If you’re making R&D claim for the first time, you can claim R&D tax relief for the last two accounting period. However, before a company can claim for this benefit, the relevant project must undergo an assessment for the HMRC to determine whether it is in fact innovative.

For larger companies: the incentive is called Research and Development Expenditure Credit (RDEC scheme), an above the line credit.

For small and medium enterprises (SME scheme): the tax credit scheme is known as a Corporation Tax relief, which can essentially reduce a company’s tax bill if they are liable for corporation tax.

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What counts as R&D?

It may interest you to know that the definition of R&D for tax purposes is much broader than you may think. Certain criteria’s have to be met in order for the government to identify a project as innovative, which then ultimately makes the business eligible for R&D Tax relief. Therefore, the HMRC has defined clear points that must be met in order for the project to be deemed as acceptable.

No matter what business size or industry sectors, if your company is undertaking a challenge by attempting to ‘resolve scientific or technological uncertainties, then you may be carrying out a qualifying activity. This could include creating new products, processes or services or changing or enhancing an existing product, process or service.

Our team of experts at Tax Bite can help you identify all qualifying activity throughout your business. Our specialised time has in depth understanding of R&D Tax legislation and strive to maximise R&D tax credit claims. Contact us for further financial information.

What costs qualify for R&D tax credits?

Before you identify what qualifies as your R&D costs, you will need to ensure that your business activities constitute R&D projects.

It is important to know that you can claim R&D tax credits on revenue qualifying expenditure, such as your daily expenditure. However, capitalised expenditure cannot be claimed as R&D expenditure.

 The following revenue expenditure costs can be included in your R&D claim:

Staff costs

For SME’s and large companies, these include:

  • Gross salaries of the staff directly working on the R&D project (wages, overtime pay and cash bonuses)
  • Employer NI contributions
  • Employer pension contributions
  • Select reimbursed expenses

Director dividends cannot be included. Any company benefits such as private medical cover are excluded from the staff costs category.

Consumable items

Any items that are directly used and consumed can qualify for the R&D project. This includes physical materials and hardware such as water, fuel and power. However, once your project to solve the technological or scientific challenge is complete, any additional costs incurred cannot be included in the claim.


Cost of software used in the R&D projects can be claimed for. This includes business software that is partly used, as long as it is included at a reasonable apportionment. 

Subcontracted R&D

As a rule of thumb for the SME scheme, you can claim 65% pf payments made to subcontractors. However, if the subcontractor is a connected party to the R&D project, you can qualify up to 100% of the expenditure.

Externally Provided Workers. (EPW)

These are the costs paid to a third party of staff who directly involved with the R&D project and are not considered as subcontractors or employees. Payments made to externally provided workers, that are part of your R&D tax credit claim are limited to 65%.

Clinical trial volunteers in the pharmaceutical industry

When it comes to R&D pharmaceuticals, clinical trials are inevitably essential. Where companies pay people, who are involved in clinical trials as part of the R&D project, this is eligible expenditure that can be included in the R&D claim.

If you are unsure what costs qualify for your business for this tax relief scheme, we are here to help you. At Tax Bite we work with you to capture all costs that can maximise your value for your claim. Get in touch for further information, and let’s get started!

What are the key benefits of R&D Tax Credits?

At Tax Bite we are driven to help innovative companies realise and achieve their full potential through vital tax credit schemes, such as R&D tax credits. R&D tax credits can elevate and transform your business in vital ways. The key benefits are:

Any sector can be eligible for this scheme

Any company, including small businesses can make claims as long as you have a project that is looking to advance science or technology that resolves a specific uncertainty, and is recognised by a competent professional, you can aim to claim for a R&D Tax credit.

Various costs can qualify

We understand how tedious the task of calculating your qualifying costs may feel. The costs tend to be claimed through RDEC or SME scheme. The expert Tax Bite team are here to help you determine exact claims and do the relevant calculations for you.

There is no minimum on claim

Following changes made in 2012 by HMRC, there is no longer a minimum amount that companies are required to pay on R&D projects for them to make their claim.

Loss-making companies can make a claim

Whether you are a loss making SME or a loss making large company, either can receive R&D tax credits as long as they are HMRC approved. This also includes failed projects or those that are still ongoing, as long as their prime objective is advance science and technology.

What’s the process to claim R&D tax credits?

We want to ensure that you maximise your R&D claim, which is why we recommend you contacting our R&D specialist team so that you can obtain the benefits your business is entitled to.

Although there is no legal obligation to do this, we do advise that you create a thorough R&D report that clearly explains the technical advancements and uncertainties you are striving to solve. We also advise outlining the eligible expenditure that will be claimed in each specific project.

Once this report has been compiled, businesses can then claim their R&D credit by filing IRS Form 6765 to the HMRC. You can submit this form yourself or use a R&D specialist to do this for you. Please contact us if you require assistance with this, our Tax Bite experts can help simplify the process, it’s what we do every day accompanied with confident overall knowledge. 

When it comes to identifying whether or not your company is eligible for R&D Tax Credit, there are some simple rules that you should be aware of:

  • The business must be a UK limited company and subject to Corporation Tax.
  • There should be expenditure that can be recognised accompanied with its financial statements for those activities.
  • The business must be carrying out qualifying research and development activities.

What R&D tax credit incentive is right for my business?

The R&D tax credit incentive that is right for your business mostly depends on whether you are a large company or an SME.


A majority of companies operating or start-ups tend to fall into this category. This incentive is applicable to you if you have fewer than 500 staff with less than or equal to a £100 million turnover or £86 million gross assets.

Large Companies

This is for large companies with 500 staff or more with more than £100 million turnover or £86 million gross assets.

If you are categorised as a SME, you will therefore claim via the SME R&D tax incentive. Whereas, if you are a large company, you will claim via the Research and Development Expenditure Credit (RDEC).

You may be interested to know that it is possible to use R&D tax credits and grant funding together to maximise value. To find out more on this, simply get in touch, our team is here to save you time and money.

How much is an R&D tax credit claim worth?

How much a R&D tax credit is worth naturally varies and depends on the project as well as the claim. However, it does tend to be worth around 25% of qualifying spend on R&D. In order for you to calculate an R&D credit, the qualifying expenditure has to be established and then enhanced by the relevant rate. These are: 

  • Corporation Tax reduction if you are profit-making
  • Cash credit if you are loss-making
  • Or a combination of the above two

By factoring in the above, this will give you your ‘enhanced expenditure’.

The benefits of R&D tax credits claim

 Increased productivity is not only beneficial for the government, but it is also great for UK companies and the economy. R&D tax credits is an effective tax credits scheme that can elevate your business; however, it is does pose to be more beneficial as a large company scheme. This is simply because large companies have to include the R&D Tax benefit before the tax calculation, so in essence the benefit is taxable.

Our Tax Bite team are specialised to help you through what could feel like a more challenging aspect of the claim. We look to facilitate all fronts of the process with support and professional insight so that we can deliver R&D credit claims that will successfully withstand HMRC scrutiny. Why not get in touch and see what we can do for you.

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