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Research and Development.

Your company is engaged in looking for new and exciting products, but did you know your research and development (R&D) can open the door to a generous tax break? If you didn’t, you’re not alone...

Rates and Eligibility Criteria for R&D Tax Relief

Many potential claims are missed because companies do not realise that they are incurring eligible expenditure. R&D tax relief is a government incentive to encourage companies to invest in R&D activities by claiming relief on qualifying costs. The rates of relief are:

  • 186% of the qualifying R&D costs may be claimed as a tax deduction by SMEs

  • R&D expenditure credit available for large companies giving relief at 14.7%

  • In addition, SMEs may choose to 'trade in' their R&D losses and receive 18.6p for each £1 spent on qualifying R&D 

  • 100% allowances are also available on R&D capital expenditure

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Changes

For accounting periods commencing on/after 1 April 2024, there is a single scheme for all companies which gives relief at an effective rate of 15% to 16.28%. For loss making companies the repayable credit is 16.2%.

In addition, if more than 30% of your business expenditure is R&D related, your business may be classified as R&D intensive.  The effective relief available then increases to 26.97%. 

But what is eligible R&D? Eligible R&D is work that is undertaken to resolve scientific or technological uncertainty aimed at achieving an advancement in science or technology. 'Advancement' may be the creation of a new product or process, or the improvement of an existing one.

R&D does not need to be successful in order to qualify for the relief outlined above. As long as qualifying R&D has been undertaken then the relief is available. In addition, company qualifying under the SME scheme may qualify for the relief even in the situation where some of the work has been outsourced to a third party.

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Are you new to R&D?

For accounting periods commencing 1 April 2023, if you have not claimed the R&D tax relief in the past, or in the previous three years an advance notification must be made to HMRC within 6 months of the end of the period.

There are additional online filing processes for all R&D claims made after 8th August 2023. Dains can help you comply with these new digital reporting requirements.

Dains can help with:

Dains Accountants excels in guiding businesses through strategic research and development (R&D) planning, offering financial expertise to optimise budgets and access tax incentives, and providing essential support for compliance and reporting requirements in the dynamic landscape of innovation.

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Find Out More About Our Research and Development Solutions

Are you looking to kickstart a new R&D project? Get in touch with Dains Accountants today to find out how we can leverage our expertise in this landscape to provide business advisory support and ensure you’re accessing potential tax credits.

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