Research and Development

R&D tax relief (or ‘R&D’ for short) is a government incentive that has been around for more than 20 years. It aims to encourage innovation by UK companies and investment in industries that are highly technological.

Any company that is liable to UK corporation tax can claim R&D tax relief, but it needs to be sure that it is undertaking qualifying activities, which can often be the biggest challenge for businesses looking to put together claims.  If you’re unsure if that’s you, just get in touch and we’ll help you establish your eligibility.

The rules governing R&D tax relief stipulate that, for a claim to be valid, a business must be seeking to achieve an advance in a particular field of science or technology and must be doing so through the resolution of scientific or technological uncertainties.

This can include developing new products, services, or solutions (or making appreciable improvements to existing ones), but claimants should be aware that the advance is measured against the baseline of the underlying technology rather than what exists in the industry or the company’s own knowledge alone.

The rates of relief have been changing recently – for expenditure up to 31 March 2023, SMEs were able to obtain a cash credit worth up to 33.35% of its qualifying expenditure, but this has fallen to 18.6% for costs incurred from 1 April 2023 and falls again to 16.2% from 1 April 2024.

The benefit for large companies is increasing as the scheme is rebalanced, with benefit rates climbing from 10.5% for expenditure incurred up to 31 March 2023 to 16.2% for costs incurred thereafter.

To help understand what you might be able to claim, feel free to get in touch.

All claims must be submitted through HMRC’s online portal through the completion of an “Additional Information Form”, or AIF.  As well as asking for details of the projects and costs claimed, this asks for details of anyone involved in the preparation of the claim and a named individual within the company who HMRC can speak to about the claim.

The process of making an R&D claim can take anywhere from a few days up to several weeks, depending on the availability of staff and data.

Once submitted, claims are often processed by HMRC within a few weeks, but it can take longer.

The main area of risk is in submitting an incorrect claim – either assessing something as qualifying R&D when it isn’t or including the wrong costs in claims.  HMRC are currently challenging around 20% of submissions and their main focus is understanding, from the business itself, how it is advancing knowledge or capability in a field of science or technology (rather than with a specific industry).

It is worth noting that claims previously paid out are not guaranteed – HMRC are increasingly challenging historical claims and, where successful, requiring repayments of the R&D tax relief obtained.

It depends on your comfort with the R&D tax relief rules and your desire / capacity to undertake the work in-house. A lot of companies prefer to use a specialist advisor to provide up to date knowledge of the process and claim landscape.

We can support as a fully outsourced provider of your claim through to providing a review facility for a claim put together in-house, depending on what level of service you need; and we are aware this can change from one claim to the next!

As claims for R&D tax relief are being increasingly challenged by HMRC, you should be comfortable that whoever supports your claim has significant experience of making and defending R&D tax relief claims.

A lot of accountancy firms are no longer performing R&D tax relief services due to the requirement for specialist knowledge, balancing tax, accountancy and technology.

Using an independent party to support you – rather than your auditor – helps ensure that the process is robust and won’t slow down the signing of your accounts.