Claiming For R&D Tax Relief On Revenue Expenditure
If your business is actively conducting research and development as part of its operations, you may be aware that tax relief for qualifying projects is available. Many companies, however, don’t claim because knowing which activities are eligible and how to claim for them can be complicated, even confusing. But not claiming can mean losing out on potentially large sums of money that can be invested back into the projects you’re undertaking.
If your business could be receiving research and development tax relief but currently isn’t, here is some guidance on how you can claim on revenue expenditure.
Which projects qualify for R&D tax credits
To qualify for R&D tax credits, your company must pay UK corporation tax and be carrying out a project that aims to make scientific or technological advancements that have not previously been achieved. These cannot be solely for commercial gain, but must benefit the field in some way. The project does not need to be complete, or even successful, for you to claim tax relief on it – you must simply explain to HMRC what your endeavours were and how you’re aiming to resolve an uncertainty or make an advancement.
If you’re still unsure whether your business’ project qualifies, ask yourself a few of the following questions:
- Are you differentiating yourself within your sector?
- Have you taken a risk in attempting to achieve scientific or technological progress?
- Have you invested time and resources into making processes or products more efficient?
- Do you employ highly skilled staff with expertise in a scientific or technological field?
Answering yes to any of the above could indicate your activity qualifies, and it’s advisable to speak to an R&D tax specialist about making a claim.
What you can claim for
Tax relief can be sought for revenue expenditure on eligible projects. This includes the cost of employing staff to work directly on the R&D project, the cost of a staff provider whose contracted individuals are working on the project, materials, utilities, software and selected subcontractor costs. The government outlines how and when costs for subcontractors can be claimed for on its website.
How to claim on revenue expenditure
Claims can be made on your corporation tax return up to two years after the end of the applicable corporation tax accounting period. Depending on whether your business is classified large or small for the purposes of a claim, you can receive up to 230% of the revenue costs back in relief. Employing the services of an accountant or R&D tax advisor will ensure you calculate the amount of tax relief correctly and submit an accurate return.
Although it’s not necessary to create new records specifically for an R&D claim, you will need to ensure your records are kept in a way that means access to information regarding and R&D projects is easily accessible. HMRC may wish to check your company’s records in order to verify compliance, so if you plan to claim for research and development tax credits, it’s worth getting them in order.