UK Research and Development (R&D) tax relief is one of the most effective and generous tax reliefs in the world. Claiming the government-backed relief can significantly reduce a company’s tax bill, and even result in a tax refund.
However, many companies that are entitled to the relief, do not claim either through lack of awareness or because it seems complex or inappropriate to their business. R&D tax relief is not just for traditional scientific research but also for development work in design and engineering.
R&D tax relief rewards companies that invest in innovation, developing new technologies to substantially improve products, processes, devices, materials and/or services. The requirements are purposefully broad. Whatever size or sector, if your company is taking a risk by attempting to ‘resolve scientific or technological uncertainties’ then you may be carrying out qualifying activity. R&D does not have to have been successful to qualify. You can also include work undertaken for a client as well as your own projects. All companies, large and small, can claim if they undertake qualifying work – even if they do not pay Corporation Tax because they are unprofitable.
Some companies will be eligible for up to 230% on their qualifying R&D costs. So, if your company is paying Corporation Tax at the current rate of 19% and spends £100,000 on qualifying R&D it could save tax of £43,700. Loss-making companies can surrender their losses in certain circumstances in return for a payable tax credit.
