Research & Development (R&D) tax Relief
Research & Development Tax Relief is granted by HMRC to help reduce your company’s tax bill!
You can claim R&D relief if a project seeks to achieve an advance in science or technology through the resolution of scientific or technological uncertainty.
Relief is on expenditure directly associated with R&D, including staffing, materials, software and some subcontracted costs (65%). Expenditure on capital assets is not included, but may qualify for 100% capital allowances.
SME’s can claim relief of 230%. This means that for every £100 of qualifying costs, your company could reduce your CT by an additional £130. 100% of the original cost plus 130% additional relief.
| Example 1 | |
| R&D expenditure | £10,000 |
| Normal profit | £13,000 |
| R&D relief | £10,000 x 130% = £13,000 |
| Profit after R&D relief | 0 |
If your company has an allowable trading loss, this can be increased by 130% of the qualifying R&D costs. This loss can be carried forward in the normal way, but only if you choose not to convert it to tax credits (14.5% of adjusted loss).
In this example below, – £10,000 adjusted loss can be carried forward or a cash repayment of £1,450 from HMRC.
| Example 2 | |
| R&D expenditure | £10,000 |
| Normal profit | £ 3,000 |
| R&D relief | £10,000 x 130% = £13,000 |
| Loss after R&D relief | – £10,000 |
Potential tax credit: £10,000 x 14.5% = £1,450
R&D tax relief can be claimed on your Corporation Tax Return. The normal time limit for making your claim is 2 years after the end of the relevant accounting period.
HMRC will make approved payments after they receive your return.
If you wish to know more about Research & Development Tax Relief or need help with an application please contact us on 01223 422 350, info@psfaccounting.co.uk. Alternatively, call in and see us at St Johns Innovation Centre for an informal chat.