Who Is Eligible to Claim R&D Tax Credits?
Does your company work on innovative projects within the science and technology sector? If your organisation has invested time and money carrying out research and developing new products and/or services, you could be eligible to claim Research & Development (R&D) tax credit, which can reduce your tax bill or increase taxable losses. To qualify for R&D tax relief, you must be able to explain how the project looked for an advance in science and technology, how the project had and tried to overcome uncertainty, and how it couldn’t be easily worked out by someone else. According to the Gov website, “Your project may research or develop a new process, product or service or improve on an existing one.”
The project must look for an advance in the field, as opposed to just an advance within your business. It should be proved that the project wasn’t already known to be achievable within the field and the process undertaken to make the advancement achievable should be illustrated. You should also be able to explain that a professional in the field couldn’t have easily produced your advancement, which can be proven by demonstrating failed projects or solutions.
What Are the Benefits?
If you’re a small or medium sized business, R&D tax relief will allow you to deduct an extra 130% of your qualifying costs from your yearly profit, and claim tax credit worth up to 14.5% of your unrelieved trading loss if your company is loss making.
Large companies can claim a R&D Expenditure Credit for working on R&D projects, which is worth 12% of the qualifying R&D expenditure.