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Successfully claiming R&D tax relief will:
Any company in any industry may be eligible for HMRC R&D tax credits, however, you must be undertaking development activities that seek to achieve an advance in science or technology, or activities that directly contribute to advances by resolving scientific or technological uncertainty. While this sounds very complicated, please don’t be put off, in reality a huge number of businesses are doing this without realising. The outcome of the project can be tangible, such as new products or processes, or intangible, such as knowledge or cost improvements, even failed projects can qualify.
The following costs may qualify for relief:
Many businesses are unaware that claims can be made for capitalised expenditure and miss out on significant extra benefits. We can assist in identify any qualifying capital expenditure and advise on how to maximise your R&D claim benefit.
The resulting cash benefits of a successful R&D claim, based on different levels of qualifying costs, are below.
| Costs qualifying for R&D | Benefit when surrendering losses for a cash payment from HMRC | Reduction in tax payable where 86% relief is used to offset future corporation tax liabilities of your company |
| £100,000 | £26,970 | £21,500 |
| £500,000 | £134,850 | £107,500 |
| £1,000,000 | £269,700 | £215,000 |
Many businesses claim R&D tax relief and it can be an essential source of much needed cash. However, we find that many are unaware of what projects and expenditure types are eligible, and we also see mistakes in claims. As a result, your claim may be missing expenditure that could rightfully be claimed, or it may include costs that aren’t qualifying, which could mean risking an HMRC enquiry into your claim.
We take time to listen to your business to understand the goal you’re trying to achieve with your innovation, so we can help you overcome problems and challenges along the way. By being open and honest, we aren’t afraid to challenge our clients to make sure that your claim is correct and you’ve optimised the benefit. We want to help you understand your eligible activities, without holding you up, so you know how to build a robust R&D claim. We're here to fully support you with preparing and claiming R&D tax credits.
HMRC is taking action on erroneous or fraudulent R&D tax credits UK claims by issuing R&D compliance checks for claimants. If you have concerns that your existing claims might be incorrect, the best approach is to have your claim reviewed by an independent regulated firm, such as Buzzacott, to look for issues that HMRC might challenge.
If you’ve received an R&D enquiry letter, you might be facing months of correspondence and a delay in the credit being paid to you. Worst case scenario, HMRC could reduce the claim value or even issue penalties for a poorly prepared claim. With a bit of support, the complex enquiry process can be less daunting and time-consuming.
We understand what HMRC is looking for in their requests and will guide you through the process calmly, providing realistic advice on what you need to do and when.
Your businesses should be looking at all R&D incentives to support you through the its lifecycle. To find out more about these incentives, please click the links below.
If you would like to speak to one of our R&D experts to find out more about how we can help, please get in touch via the form below or call +44 (0)20 7710 3330.
Once HMRC receives an R&D claim, the claim is passed for processing. If the claim is considered reasonable, the credit will typically be paid out within 40 days. However, HMRC is randomly checking a large proportion of claims at the current time, and if you receive a compliance check, this can delay any payment.
You can make a claim under the SME scheme for up to two years after the end of the accounting period in which you incurred the qualifying R&D expenditure. For example, if your accounting period ends on 31 March 2023, you can make a claim for SME tax relief on qualifying R&D expenditure incurred between 1 April 2023 and 31 March 2025.
However, with the introduction of claim notification requirements, you may not be able to claim for a tax year starting on or after 1 April 2023 if you have missed the deadline for submitting this form. So, businesses need to be thinking about making an R&D claim as they’re incurring the qualifying spend.
Yes, as long as you’re still undertaking eligible R&D activities in the claim period, you can claim R&D tax credits every year.
Yes, under the SME scheme, you can make an R&D claim even if your company is loss-making. However, the company’s financial position is important when estimating the benefit, as the benefit is calculated depending on the company’s financial position. Under the SME scheme, the benefit will be received in the form of a cash credit in a loss-making company. But please be aware the SME scheme may be changing in 2024, and it’s worth factoring in any changes when assessing the benefits of making a claim.
Yes, as long as you were undertaking eligible R&D activities, you can claim under the scheme. In fact, the government encourages businesses to claim on failed projects, as this can help offset the cost of failure and encourage businesses to continue to invest.
No, an SME cannot claim R&D tax credit relief under the SME scheme if the project is receiving grant funding or notified state aid. However, it will be able to claim under the RDEC scheme instead. Again, there are proposed changes to be implemented in 2024 that may prevent any claim where a grant has been received, so please speak to the team at Buzzacott for more details.
R&D tax credits will continue after Brexit. However, it’s worth noting that under the terms of the Trade Cooperation Agreement, the SME scheme remains as State Notified Aid and companies need to be careful how this may impact grants or funding obtained under the new subsidy rules. This is a complex area, and businesses should consider consulting rather than making a costly mistake.
If HMRC finds that you have made a claim for R&D tax relief that is not eligible, they will disallow the claim. This means that you will either not receive any tax relief or that you may have to pay back any tax relief you have already received. However, if HMRC believes the mistake was careless, you could be issued penalties. Therefore, it’s always worth consulting with an advisor such as Buzzacott before making an R&D claim.
We’ve provided a dedicated page for calculating R&D claims. Our R&D calculator isn't a substitute for professional advice, so get in touch with our R&D experts to receive an accurate estimate.
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Iain Butler
21 June 2023
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