Investment in qualified R&D activities may entitle you to significant tax incentives.

R&D tax incentives offer increased tax relief for companies investing in research and development, leading to either a tax reduction or a cash payout. If you operate a limited company and have been working on a project aimed at achieving technological, scientific, or industrial innovations that are not already available, you may qualify for R&D tax relief.

What can you claim?

SMEs can deduct up to 230% of eligible R&D expenses from their taxable profits. Loss-making companies can apply for tax credit calculated at 14.5% of the eligible R&D claim, subject to some possible restrictions included in the rules.

Eligibility criteria for R&D claims

The project focuses on achieving innovations in science and technology.

It should be connected to the company’s existing trade or a trade it plans to pursue if the R&D outcomes are favorable.

There must be some level of insecurities about the project’s success from the start, and the company must outline how these concerns will be addressed. Additionally, the insecurities should not be easily resolved by a qualified professional in the relevant field.

Which expenses are eligible?

• Employee costs: Agency worker expenses are capped at 65%.
• Materials and consumables
• Software purchases
• Subcontracted R&D expenses: limited to 65% of the total costs.
• Compensation for clinical trial volunteers

Claims

You can submit a claim to HMRC within two years following the end of the accounting period. HMRC strives to review claims within 28 days of receiving them.