R&D Tax Credits
Knowledge Hub
R&D Tax Credits Essentials
UK R&D Tax Credits
The Essentials of the HMRC Initiative
ROI R&D Tax Credits
All About Revenue’s Innovation Relief
Amplifi Solutions’ Process
Signing to Submission
UK R&D Tax Credits FAQ
Qualifying For R&D Tax Credits FAQs
Which sectors can claim for R&D tax credits?
As long as an innovation seeks to resolve a scientific or technological uncertainty (a gap in the market) that a qualified professional couldn’t easily solve, that innovation could qualify for the incentive.
However, the most frequently claiming sectors are software, engineering, manufacturing and life sciences.
What qualifies as an R&D tax credit project?
A qualifying innovation project must attempt to fill a gap in the market by creating a new or enhancing an existing product, service or process.
In doing so, the R&D project should include the following:
- A scientific or technological uncertainty. This is your innovation challenge, following a logical and planned methodology in order to attempt to resolve the problem.
- An attempt to advance a given sector’s knowledge or understanding of the uncertainty (innovation challenge).
- A qualified professional who could not easily resolve the uncertainty.
- Financial commitment into research, testing and analysis in an attempt to resolve the uncertainty.
The innovation project may be successful or not. As long as an attempt was made, the R&D project could qualify.
What qualifies as an R&D tax credit activity?
There are non-qualifying and qualifying stages of an innovations’ life cycle.
Non-qualifying
- Commercial/scientific idea
- Market feasibility research
Qualifying R&D
- Establishing technological or scientific uncertainty
- The process of resolving the technological or scientific uncertainty
- Prototyping
Non-qualifying
- Patents or other IP protection sought
- Pre-production design
- Industrial upscaling
Which costs qualify for R&D tax credit claims?
The following 5 costs qualify if they were directly used or consumed in the R&D project:
1. People – Salaries, wages, NICs & pension contributions of employees and externally paid workers.
2. Subcontractors – Up to 65% of unconnected subcontractor, agency staff or freelancer costs (SME scheme, more restrictions on the RDEC scheme see R&D tax credits explained).
3. Raw Material – Materials and hardware e.g. chemicals, ingredients, electronic components.
4. Utilities –Power, water and fuel.
5. Software – Software expenditure (Data & Cloud Computing Costs (including data storage, hardware facilities, operating systems, software platforms and the purchase costs of data sets) will also be included on or after financial years beginning on or after 1st April 2023).
When can you claim R&D tax credits?
R&D tax credits can be claimed for the last two closed financial years.
Can grants effect your R&D tax credit claim?
It is possible to claim both grants and R&D tax credits. However, this can be very complicated, and we advise you speak to a member of our team for more assistance.
SME vs RDEC Scheme FAQs
What is the difference between the SME and RDEC R&D tax credit schemes?
The SME scheme offers small and medium-sized businesses an additional tax deduction of up to 130% (changing to 86% for expenditure incurred on or after the 1st April 2023) off qualifying R&D project spend.
The RDEC scheme offers large enterprises an additional tax credit gross benefit of 13% (changing to 20% for expenditure incurred on or after the 1st April 2023) on qualifying R&D spend.
Please Note – SME and RDEC schemes will be replaced by a new R&D Tax Credit Merged Scheme, which will come into effect for accounting periods commencing 1 April 2024 – more information on the merged scheme
What is an R&D tax credit SME?
Under the incentive, SMEs are defined as companies with:
- Less than 500 employees
- Turnover less than €100m or balance sheet total less than €86m
- The project has not received any other notified state aid (if it has, that project will have to claim under the RDEC scheme)
Please Note – SME and RDEC schemes will be replaced by a new R&D Tax Credit Merged Scheme, which will come into effect for accounting periods commencing 1 April 2024 – more information on the merged scheme
What is an RDEC scheme large business?
Under the incentive, RDEC large companies are defined as limited companies with:
Primarily
- More than 500 employees
- or with a turnover of more than €100m or a balance sheet total of more than €86m
Sometimes
- An SME with a proportion or all of the innovation spend that has already been supported by particular grants (something which is restricted on the SME scheme)
Please Note – SME and RDEC schemes will be replaced by a new R&D Tax Credit Merged Scheme, which will come into effect for accounting periods commencing 1 April 2024 – more information on the merged scheme
What is the R&D tax credit SME scheme rate?
The SME scheme offers an additional tax deduction of up to 130% off qualifying R&D project spend.
However, expenditure incurred on or after the 1st April 2023, will receive a new rate of 86% on all qualifying spend.
Please Note – SME and RDEC schemes will be replaced by a new R&D Tax Credit Merged Scheme, which will come into effect for accounting periods commencing 1 April 2024 – more information on the merged scheme
What is the R&D tax credit RDEC scheme rate?
The RDEC scheme offers large businesses support in the form of an additional tax credit net benefit of 13% on qualifying R&D spend.
However, expenditure incurred on or after the 1st April 2023, large businesses will receive a new tax credit gross benefit rate of 20% on qualifying R&D spend.
Please Note – SME and RDEC schemes will be replaced by a new R&D Tax Credit Merged Scheme, which will come into effect for accounting periods commencing 1 April 2024 – more information on the merged scheme
Merged Scheme - What is it?
Replacing the SME and RDEC scheme, the new R&D Tax Credit Merged Scheme will come into effect for accounting periods commencing 1 April 2024, and consist of the following:
- Contracted R&D:
In the new merged scheme, the company making the decision to undertake R&D can claim for contracted R&D. For example, if a software company contracted to deliver a solution decides to engage in R&D for that solution, they are eligible to claim. - Subsidised Expenditure:
Similar to the existing RDEC scheme, the merged scheme will not reduce support if a company receives grants covering a portion of its R&D expenses. - Loss-making Companies:
The notional tax rate for loss-making entities in the merged scheme will be lowered from 25% (as in the current RDEC scheme) to 19%. - Tax Relief Delivery:
Tax relief will be administered through a taxable above-the-line expenditure credit, which will be implemented at the current RDEC rate of 20%. - Payment Process:
Third parties cannot be nominated as payees for R&D tax credit payments, which means, in most cases, R&D reliefs will only be paid directly to the claimant company.
R&D Tax Credit Process FAQs
What financial information is needed to complete an R&D tax credit claim?
To perform an in-depth analysis of a project’s relevant R&D expenditure (i.e. staff & EPW, subcontractors, consumables, utilities, software, data & cloud computing costs) and to create an R&D tax credit report that has a full and defendable audit trail, our R&D specialists will analyse the following financial documentation.
- Payroll
- Nominal ledger transactions
- Grant information
- Copy of the statutory accounts
- Copy CT600
- Copy of Tax Computation
How do you write an R&D tax credit technical narrative?
To tackle abuse and fraudulent R&D tax credit claims, the government has introduced a new cross-cutting team and is requiring more detailed claims.
Therefore, the technical narrative needs to fully justify the expenditure outlined in the financial report.
Our industry experienced technical writers will interview key members of the R&D team and produce a comprehensive technical narrative, which will include key information such as:
- Background into the company
- Project aim/context
- Key people who worked on the project
- Advancement being sought
- Scientific and Technological uncertainties
- How attempted to resolve them
What does an accountant do in Amplifi’s R&D tax credit process?
In our process, the accountant is only required to:
- Possibly, share relevant financial information with our team.
- Submit the completed claim to the HMRC and make the necessary CT600 amendments (all the information for these steps will be provided by Amplifi Solutions).
How can you claim R&D tax credits?
We recommend working with a specialist R&D tax credit provider (like Amplifi Solutions) to complete an R&D tax credit claim.
We have an experienced team of qualified accounts, data analysts, tax advisors and industry experienced technical writers who will compile a comprehensive claim, which we will defend against any HMRC enquiry.
When will the HMRC pay my R&D tax credit relief?
Offsets will be taken off the tax bill when it is due.
Cash payments are estimated at 40 – 60 days, but this does depend on the HMRC workload.
Why would the HMRC launch an enquiry on my claim?
The R&D tax credit incentive is currently undergoing a number of reforms, one of which is improving compliance and tackling abuse (£469 Million was lost in 2020/21 alone to fraudulent claims and error).
Subsequently, a number of new measures have been introduced, including adding 100 more compliance team members and requesting more details in claims, but it has also resulted in a rise in enquiries.
Some of the main reasons a R&D tax credit claim may undergo an enquiry include:
- No supporting information
- Disparities in the financial information or technical narrative
- Lack of qualifying proof
- Random selection
To help project your claim, work with an R&D tax credit advisor, like Amplifi Solutions.
We perform in-depth financial analysis of your R&D expenditure, create educated technical narratives that justify your spend, and we will defend our reports against any HMRC audit.
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R&D Tax Credit Sector Examples
Creating electrical, security, power, telecommunications, fire protection, water and waste systems, HVAC, etc.
Bespoke fixtures, fittings, materials, tools, jigs, manufacturing processes, replication, refurbishments, etc.
Adapting flavours and recipes. Developments to improve shelf-life, production or to meet new trends and regulations.
Updating products, finishes, performance features, etc. New waste reduction processes, technology infrastructures etc.
Innovative refrigeration, plumbing, heating, waste and HVAC system designs. CAD modelling, CFD analysis etc.
Development of generators, wastewater treatment, offshore electrical infrastructures, drilling equipment etc.
Downloadable R&D PDFs
UK R&D Tax Credits
Outlining the essentials of the HMRC R&D relief incentive including the schemes, qualifying R&D activity and qualifying costs.
Investor Partnership
This PDF explains the benefits of working with Amplifi Solutions expert team for your business and your clients. Plus some qualifying R&D questions.
Why Amplifi Solutions?
Step-by-step guide of our in-depth claim’s process, our in-house team’s expertise, agile service and our customer service standards.
Ireland R&D Tax Credits
Breaking down the Revenue’s R&D tax credit scheme and explaining what projects and costs would qualify for the 25% R&D credit.
Additional Innovation Services PDFs
Land Remediation Relief
Businesses could receive a tax credit between 8p – 28.5p for every qualifying pound they have spent bringing the land back into a productive state.
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With Patent Box companies can apply for a 10% Corporation Tax rate on worldwide profits that are credited to qualifying intellectual property rights.