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Vanessa's Viewpoint: R&D Tax Relief
05/10/2023

 

Welcome to the 'Vanessa's Viewpoint,' where our Senior Manager, Vanessa, delves into real-life success stories. Join us as she unveils captivating case studies, showcasing the diverse range of services Red Shoes Accounting offers to our valued clients

Research and Development (R&D) tax relief is available to qualifying businesses for projects that advance knowledge in their field and overcome technological uncertainty. The government views such innovation as a significant driver of the economy and supports it by providing financial incentives. If you are creating or modifying products or processes that no one has achieved before, you may well be conducting R&D.

There are two schemes that a business might be eligible for, and for small companies, it is indeed possible to qualify for both in one year if multiple projects are being undertaken. These schemes are often referred to as SME and RDEC.

Understanding which projects and costs qualify for R&D and how the two schemes interact is crucial. Grants and subcontracting can also impact the claim. Costs related to staff, subcontractors, and some consumables can qualify for tax credits.

The claim can either reduce the corporation tax liability or even result in a cash payment from HMRC.

Case Study

We recently assisted a client in claiming R&D tax relief, resulting in a payment from HMRC in excess of £50,000, which was vital for cash flow to advance to the next stage of their project.

This claim was complex because the small company was working on multiple projects, some grant-funded and some self-funded. This meant that a claim could be made under both the SME and RDEC schemes. The types of costs that can be claimed under each scheme differ slightly, so we worked closely with the finance team to obtain the necessary information. We also thoroughly reviewed the grant documents to ensure accurate calculations. The SME scheme is available to companies with less than 500 staff and either turnover under EUR100m or a balance sheet total under EUR86m. However, you also need to consider whether you have any external investors, grant funding and if you are subcontracting to another business.

A technical report explaining the projects, the technological uncertainties to be resolved, and detailing the advancement in knowledge sought is recommended.

There have been changes to the rates and administration of the scheme this year, making it a hot topic. HMRC is increasingly scrutinising claims, so expertise in this area is crucial, as well as maintaining detailed records.

Unlike other R&D advisors, we do not charge a percentage of your claim; instead, our fee is based on the required expertise and the complexity of the claim. As your trusted accountant, we are also familiar with your business, goals, and history to ensure a robust claim can be made.

Please get in touch if your business is considering an R&D claim and would like to discuss the process and potential benefits.