The first point to note is that Research and Development (R&D) tax credits are a specialist area and if you think that you may be eligible the best advice is to work with your tax adviser to ensure that the claim is presented correctly to HMRC. As your Financer Director, part of our role at Tectona is to enable this to happen.
R&D tax credits are a company tax relief that can either reduce a company’s tax bill or, for some small or medium sized (SME) companies, provide a cash sum. They are based on expenditure on R&D for companies carrying out projects seeking to advance science or technology. You need to be able to state what the intended advance is, and to show how, through the resolution of scientific or technological uncertainty, the project seeks to achieve this.
The actual R&D expenditure for tax purposes is the costs of those activities within the project that are accounted for as R&D using generally accepted accounting principles and that fall within the definitions set out by the Department for Business, Innovation and Skills. The type of project advance being sought must be one of advancing the overall knowledge or capability in a field of science or technology, not a company’s own state of knowledge or capability alone.
In making any claim there are two schemes available; one for SME businesses and one for large companies (which may also in certain circumstances be available to SME’s). The amount of relief available varies dependent on the year in which the expenditure took place, and whether the business is loss making or otherwise. It is best to seek clear professional advice when making any R&D tax credit claim, and we at Tectona can help you achieve this first by helping identify if you have a potential claim and then maximising that claim.