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Research & Development (R&D)

 

R&D tax relief is available to companies that are developing a product through an advance in science or technology by overcoming scientific or technological uncertainty.

 

For small to medium sized companies (SMEs), the relief takes two forms:

 

Firstly, enhanced R&D tax relief – for every £1 of qualifying costs spent on R&D, the company receives a deduction in calculating their taxable profit for corporation tax purposes of £2.30.   This means that a profitable company’s tax bill can be cut by up to 26% of the R&D spend.  Qualifying categories of costs for relief includes:  

 

  • Staff involved in R&D 
  • Materials, heat, light, power 
  • Subcontracted R&D 
  • Software 
  • Clinical trial volunteers

 

Secondly, for loss making companies up to 33.35% of the qualifying cost can be available as a tax refund.

 

The relief for Large Companies (i.e. a company or organisation with more than 500 employees, an annual turnover exceeding €100 million and a balance sheet exceeding €86 million), is less generous at £1.30 for every £1 spent.

 

For Large Companies, the Research & Development Enhanced Credit (RDEC) scheme (also commonly referred to as the ‘Above the Line’ credit) provides for a taxable receipt paid net of tax to companies of 11% of the qualifying spend.  This can be paid even if the company is loss making.

 

Claims for R&D tax credits can involve a lengthy and complex process of identifying the qualifying R&D being undertaken and analysing the qualifying costs.

 

Eaves and Co has a proven track record in completing successful R&D claims and can offer assistance in all aspects of the claim process; from an initial review of the company’s activities to detailed ledger analysis and submission/follow up of claims with HM Revenue and Customs.