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Research & Development

Research and Development (R&D) relief is available to companies that incur expenses on a project which seeks an advance in science or technology.

This relief offers assistance to companies in the form of a reduced company tax bill or, for small to medium sized enterprises (SMEs), a cash sum if making a loss.

If your company is involved in projects which you believe seek to achieve an advance in overall knowledge or capability in a field of science or technology and you would like an expert opinion, or require assistance with making the claim, please get in touch.

We have assisted our clients by considering whether work undertaken contributes to an “advance in science or technology” and have successfully claimed R&D relief from HMRC resulting in significant tax savings for our clients.

Conditions

Research and Development (R&D) relief is available to companies that incur expenses on a project which seeks an advance in science or technology.

In order to qualify for the relief, the R&D project must seek to ‘achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty’.

This is a subjective area, and the questions HMRC will consider are:

  1. What is the current state of knowledge in the field?
  2. How does the business intend to improve on the current state of knowledge in the field?
  3. What technological uncertainties does the business intend to resolve?
  4. How does the business plan to resolve the above uncertainties? i.e. the process and methods of developing/producing new knowledge.
  5. What is the aim of the R&D project? e.g. a more efficient technological product, a new and more efficient process, new knowledge.
  6. When achieved, will the consequence of the project represent an increase/improvement in knowledge in the field? e.g. make tasks more efficient, cheaper, more environmentally friendly, etc.

Expenditure incurred must be ‘qualifying expenditure’ for the purposes of the relief. For expenditure to qualify, it must have been incurred on the following:

  • Revenue items, including software and consumable items
  • Payments to subjects of clinical trials
  • Staff costs
  • Sub-contracted R&D costs
  • Externally provided workers

Research and Development Claim

The Problem

An established electrical installation company develops bespoke electrical control systems for its clients. The requirement of the systems to be tailored to each client, means that significant amounts of time and expenditure is spent creating prototype systems and overcoming technological uncertainty.

The Solution

We analysed the company’s projects and consulted with the client to identify where technological uncertainties were overcome, and where advancements were made in their field. The costs were then reviewed against Government guidelines, and amounts eligible for relief were calculated and compiled into a report.

The Result

The client claimed relief of over £95,000, reducing their corporation tax bill to nil, and providing a refundable tax credit of £3,500.
The continued investment in research and development activities meant that we were able to assist the company in making a similar claim in the following year as well.

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