Research and Development Relief. How does it save costs?

Research and development plays a vital role when it comes to the growth of your business. Every company should invest in research and development to improve their existing products and to innovate new ones.

The government also encourages companies to invest in research and development projects by giving tax relief .This can be in the form of cash injection or reduced corporation tax.

Many companies do not realize that they qualify for research and development tax relief. If you are not sure if the research and development relief applies to you contact Taxaccolega, accountants in croydon and they will help you with it. In simple words you can qualify for the relief if the following applies to you:

• You are a UK based company
• You are working on improving the existing products or innovating a new product.

You will have to be very organized if you want to get relief. In Fact the rules are getting even more serious. One of which is you will be required to provide additional information in relation to the claim which will include description of R&D undertaken,breakdown of qualifying costs, details of the agent who advised on the R&D claim and a space for the sign off from the senior officer of the company.

Also there is a requirement for the digital submission of all the corporation tax returns that contain R&D claims.

You will be eligible for different types of R&D relief depending on the size of your company or if the project has been contracted to you.

What can I claim?

If you are an SME

If you are an SME, R&D tax relief allows companies to

1. Deduct an extra 130% of their qualifying costs from their yearly profits in addition to the normal 100% deduction to make a total of 230% deduction.
2. If the company is making a loss, you can claim a tax credit of 14.5% of the surrenderable loss.

What are the qualifying costs?

1. Employee costs

For your employees working directly on the R&D project you can claim a portion of their employee costs which will include their salaries, wages, class 1 NI, pension fund contribution.

2. Subcontractor costs

If you have hired someone else for R&D activities you can claim 65% of the relevant costs.

3.Software Costs

If you have bought any software which you are using for R&D activities you can claim costs such as license fees

4.Consumable Items

You can claim for materials and utilities

When can I claim R&D costs?

• You can make a claim for R&D relief up to 2 years after the end of the accounting period.
• The relief can be claimed by treating it as a deduction from the company’s profit for the accounting period.
• You can even claim R&D on unsuccessful projects as well.
• It is claimed on projects which are intended to make an advance in science and technology

If you need help with your research and development claims and you are looking for research and development agents, we at Taxaccolega can help you with your R&D claims. 

Source: https://www.gov.uk/guidance/corporation-tax-research-and-development-rd-relief