R&D tax credits are a UK government incentive designed to encourage companies to invest in research and development. Introduced by HMRC in 2000, these credits allow businesses to claim back a portion of their R&D expenditure as a cash payment or a reduction in their corporation tax. This applies to a wide range of industries and project types, fostering innovation and growth.

HMRC R&D tax credits power innovation and growth for over 76,000 UK businesses by providing financial support for their research and development activities. This helps companies invest more in innovation, driving further growth and development.

Any UK limited company subject to corporation tax that is involved in research and development activities, such as creating or improving products, processes, or services, can be eligible for R&D tax credits. Under the RDEC scheme, this includes both SMEs and larger companies.

To apply for R&D tax credits, you need to submit a claim as part of your company’s annual corporation tax return (CT600). The claim should include a detailed report of your R&D activities and expenditure. HMRC reviews the claim and, if approved, issues the payment or tax relief.

The Research and Development Expenditure Credit (RDEC tax credit) is a scheme primarily for larger companies that allows them to claim a tax credit worth 13% of their qualifying R&D expenditure. SMEs can also claim under RDEC in certain circumstances, such as when they receive grants or subsidies.

Please note, the government plans to combine these schemes. We will have more information and guidance when scheme is announced.

Projects that qualify for R&D tax credits include those that seek to advance science or technology, resolve scientific or technological uncertainties, or significantly improve existing products, processes, or services. These can apply to a wide range of sectors and industries.

Eligible expenses for HMRC R&D tax credits include staff costs, subcontractor costs (for SMEs), materials, utilities, software, and other costs directly related to R&D activities. This comprehensive coverage ensures that businesses can recover a significant portion of their investment.

Unsuccessful R&D projects can still qualify for tax credits. HMRC allows claims for projects that aim to advance science or technology but do not succeed. This provides financial relief even when the R&D outcomes are uncertain.

Under the R&D tax credit scheme, SMEs can claim up to 33% of their qualifying R&D expenditures. This includes costs such as staff wages, materials, and overheads related to the R&D project, offering significant financial support.

Yes, if you’re claiming for the first time, you can claim R&D tax credits for the past two financial years. This allows you to maximise your potential benefit by including past R&D activities in your claim.

The average claim size for R&D tax credits varies by industry and company size. For SMEs, it is approximately £57,330*. This figure highlights the substantial financial support available through the scheme.

*Correct as of 2023

Once a claim is submitted, HMRC typically takes four to six weeks to process it and issue the payment or tax relief. This prompt processing helps businesses quickly reinvest the funds.

Many countries, including France, Germany, the USA, and Canada, have similar R&D tax credit schemes designed to incentivize innovation. The specific rates and eligibility criteria vary by country, but the goal of supporting R&D activities is common.

For SMEs, research and development tax credits are not considered taxable income and are treated as a reduction in the company's tax liability. Under the RDEC scheme, the credit is taxable and should be shown as income in the financial statements.

R&D tax credits provide financial support that can be reinvested into your business, helping to fund further innovation, hire new staff, or expand operations. This financial boost can significantly enhance your company’s growth prospects.

Supporting documentation for an R&D tax credit claim includes detailed project descriptions, records of R&D expenditure, timesheets, and any other evidence demonstrating the nature and purpose of the R&D activities. This documentation is crucial for substantiating your claim.

HMRC defines R&D for tax credit purposes as activities that seek to advance science or technology by resolving scientific or technological uncertainties. This broad definition encourages a wide range of innovative activities. The BEIS 

Yes, startups and new businesses can claim R&D tax credits, provided they meet the eligibility criteria and are undertaking qualifying R&D activities. This support is vital for early-stage companies investing in innovation.

Our specialists will work with you to identify the relevant spend and determine if your business activities qualify for R&D credit. This personalised assessment ensures that you can maximise your claim.

Yes, using an R&D tax credit specialist can help ensure that your claim is accurate, compliant, and maximised, reducing the risk of HMRC enquiries and increasing the likelihood of a successful claim. Our experts can guide you through every step of the process.