R&D Tax Relief Explained

R&D tax relief is a Government programme that supports companies that take on innovative projects which seek to advance the overall state of science and technology across many different sectors. R&D tax relief can be claimed on innovative projects whether they are ultimately successful or not.

To qualify for R&D tax relief, your project must align with the specific Government definition of R&D.  

Your project must relate to your company’s trade, whether current or future. It must also have attempted to achieve an advance or an appreciable improvement in science and technology. 

To qualify, a project must also have encountered and attempted to overcome technological or scientific uncertainty. Finally, it must be something that could not be easily resolved by a competent professional in the field. 

Not all costs related to an R&D project are eligible. Typically, the bulk of the qualifying costs are staff costs, that is, a proportion of the salary, employers’ NI and employers’ pension contributions in respect of individuals engaged in the R&D project.  

It’s important to note that this does not include any dividends paid to director shareholders.  

Consumables which are ‘used up’ in the R&D project, software costs, sub-contracted R&D and the costs incurred on Externally Provided Workers all qualify.

Companies may only claim for R&D tax relief via their Corporation Tax self-assessment return (CT600). In addition, it is strongly advised that companies submit a supporting narrative justifying the claim. There is a lot of information to consider, and many areas where it is easy to make mistakes which may undermine your claim.  

Radius has never had a claim amended because of an HMRC enquiry; our team will be more than happy to help you with your claim.

To calculate the R&D tax relief your company may be entitled to, you will need to know exactly how much you spent on R&D for the project and must also understand the tax profile of your company. 

We have built a handy calculator that is free to use and will give you an accurate estimate of what R&D tax relief you could receive. Try it today.

R&D tax credits are a relief from Corporation Tax, and there is typically a 24–month period where you may make amends to your Corporation Tax Return. You may therefore claim R&D tax credits for up to 2 years after the end of your accounting period.

HMRC aim to process SME claims within 28 days – though it can sometimes be more like 4-6 weeks after submission before any repayment or credit is issued.  

The success of a claim depends on your project’s suitability for R&D tax relief according to the Government criteria. Radius has never had a claim amended due to an HMRC enquiry. 

All our claims are subject to a robust review process and we do not submit claims unless we are confident they are made in line with the legislation and HMRC guidance.

Small and medium businesses carrying our R&D projects will generally be able to claim 65% of their subcontractor costs for qualifying activities. To qualify, the subcontractor’s work for you must be a component of your R&D project.

Yes! There are some specific guidelines to ensure software development qualifies for R&D relief but essentially the rules are the same as for any other sector – the project must be seeking to advance science and technology and the way to achieve that advance must not be obvious to an expert in the field.

In short, yes. It is important to remember that R&D relief is a relief for UK Corporation Tax, so the company undertaking the R&D project must be subject to tax in the UK. However, qualifying costs can be incurred overseas. Typically, we see this where SMEs sub-contract R&D costs, or where the claimant company engages Externally Provided Workers based overseas.

At Radius, we do all the hard work, so you don’t have to. We aim to ensure the process of preparing a claim is as easy as possible for the claimant, whilst ensuring the company retains a full understanding of the claim.  

Our typical approach is a short meeting or call to discuss eligibility. Once this is confirmed, we would aim to have a more in-depth meeting with the technical experts in the company to obtain the information needed to explain why the work done qualifies for the relief.  

We would also need to liaise with the company’s finance team to obtain the financial costs. Once we have this information, we then turn this into a claim, with clear supporting documentation explaining eligibility. We aim to ensure that our narrative in support of the claim is concise but contains sufficient information to ensure HMRC does not have any queries in relation to the claim.

Our fees are usually based on tax savings realised from a claim, usually payable on submission of the claim or on receipt of the credit from HMRC. For more information tailored to your claim, please speak to one of our team.

Receiving grant funding, or indeed subsidies of any kind towards an R&D project, can have an impact on an R&D claim. Whether and to what extent depends on the type of grant funding and the purpose for which the grant was given. If you have received, or are planning to apply for any grants, contact us to understand whether there will be any impact

No, there are two R&D relief schemes. The SME scheme is the most generous, offering relief of around 25% of qualifying costs. The SME scheme broadly applies to companies and groups with less than 500 employees and either a turnover of less than €100m or a balance sheet total of less than €86m (including worldwide linked and partner enterprises).

The Research and Development Expenditure Credit (RDEC) applies to companies and groups outside this definition and offers relief of 10.53% of qualifying costs. In some cases SMEs have to claim the RDEC e.g. if they have received certain forms of grant funding. Contact us for help determining which regime would apply.