R&D Tax Credits Explained
Supporting businesses that are taking commercial risks to advance industry knowledge, products, processes and services.
R&D tax credits are a UK government incentive aimed to support innovation within limited companies.
It enables businesses to deduct up to an additional 86% off a qualifying R&D projects spend. (Please note, for according periods starting on or after 1st April 2024 a new merged R&D tax credit scheme will come into effect and offer an additional tax credit gross benefit of 20% or R&D Intensive companies could receive an enhanced rate of tax relief of £27 for every £100 of qualifying R&D spend.)
However, to qualify, the innovative project must attempt to overcome a scientific or technological uncertainty within a particular field.
To qualify, an R&D project must attempt to overcome “scientific or technological uncertainties”.
Simply put, this is when a business sees a gap within the market and they decide to commit financially and with the time of a qualified professional to embark on a process of investigative testing, all in the hopes of solving an unknown solution.
This testing phase is what qualifies; therefore, a failed or successful solution can still claim, as long as it extends the knowledge within their field.
To qualify for the R&D support, a business must fulfil the following criteria:
R&D tax credits support innovation projects from the start to the end of the scientific and technological uncertainty. Below is an example of where, in a product’s life-cycle, qualifying R&D activity can occur.
There are five pillars of qualifying R&D costs you can claim for within the “uncertainty” phase of an innovation project.
Any incorporated business in any sector is eligible. As long as they are trying to “resolve scientific or technological uncertainties”. Please note that for accounting periods commencing 1 April 2024 a new merged R&D tax credit scheme will come into effect.