Is Your Business Eligible for R&D Tax Credits?

19 July 2019

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As the name suggests R&D Tax Credits are a government incentive to encourage companies across the UK to invest in research and development.

  • On average UK SME’s are saving £46,000 annually
  • Collectively, SME’s claimed over £2bn in the last tax year
  • The scheme has been in existence for 17 years

In this article we’ll cover scheme benefits, business eligibility and qualifying costs.

What Are the Benefits of R&D Tax Credits?

With R&D Tax Credits the initial cash benefit can help ease the pressure on working capital requirements. 

Beyond this, the tax relief works in different ways depending on your business:

For profitable SMEs tax relief for research and development is delivered in the form of an enhanced deduction from taxable profits. This is applied at a rate of 130% for qualifying expenditure. 

In contrast, loss making SMEs can surrender all or part of their loss to HMRC for a 14.5% repayable tax credit. 

Who Is Eligible for R&D Tax Credits? 

If you invest in developing products, processes or services then you may be eligible for R&D tax relief. 

However, to be eligible you must:

  • Be a UK Limited Company and subject to Corporation Tax
  • Have carried out research and development activities
  • Have less than 500 employees
  • Have an annual turnover under €100m
  • Have a balance sheet under €86m

What Costs Qualify for R&D Tax Credits?

It’s possible to claim research and development tax credits for day-to-day operational costs (classed as revenue expenditure). This can include staffing costs, software and consumables. 

However, it isn’t usually possible to claim tax credits for capital expenditure costs i.e. those associated with fixed assets such as land and buildings. 

Further Information 

For more information on tax relief specifics head to the gov.uk website. Alternatively, if you’d like to discuss R&D Tax Credits with one of our business advisors don’t hesitate to get in touch. 

Who are FD Works?

We’re an ambitious accountancy firm based in Bristol and Bath. We work with ambitious startups, growing scaleups and established firms across different sectors. We work with our partners to understand the drivers for growth in their business. 

Want to discuss R&D Tax Credits with the FD Works team?

Contact our business advisors today.

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