R&D Tax Credits
The Essentials of the HMRC Initiative
(Updated 20th Mar 2023)
All About Revenue’s Innovation Relief
Signing to Submission
Which sectors can claim for R&D tax credits?
Any Industry, Any Business
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.
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 changing an existing product, service or process.
In doing so, the R&D project should include the following:
The innovation project could result in a successful solution or not. As long as an attempt was made, your 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.
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 will also be included on Financial Years beginning on or after 1st April 2023).
When can you claim R&D tax credits?
R&D tax credits can be claimed up to 2 years after the innovation projects accounting period year-end.
Can grants effect your R&D tax credit claim?
Grants treatment in R&D tax credits can be very complicated, and we advise you speak to a member of our team for more assistance.
One thing to consider is if an aspect of an SME project has received a notified state aid grant, all or a proportion of that expenditure cannot be claimed for under the SME scheme and will move to the RDEC scheme.
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 made on or after the 1st April 2023) off qualifying R&D project spend.
The RDEC scheme offers large enterprises an additional tax credit net benefit of 13% (changing to 20% for expenditure made on or after the 1st April 2023) on qualifying R&D spend.
What is an R&D tax credit SME?
Under the incentive, SMEs are defined as companies with:
What is an RDEC scheme large business?
Under the incentive, RDEC large companies are defined as limited companies with:
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 on or after the 1st April 2023, will receive a new rate of 86% on all qualifying spend.
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 on or after the 1st April 2023, large businesses will receive a new tax credit net benefit rate of 20% on qualifying R&D spend.
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.
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:
What does an accountant do in Amplifi’s R&D tax credit process?
In our process, the accountant is only required to:
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:
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.
Examples of Innovation
Discover how different sectors like tech, manufacturing, engineering, life sciences and food and drink, can innovate and qualify for R&D tax credits.
Investors’ Portfolio Benefits
Investors seeking to increase their portfolio valuations and creasing their cash runways? This video explains how Amplifi Solutions expert service can help.
R&D Tax Credits Process
Learn about the Amplifi Solutions’ R&D claim process, from our expert team, investigatory meeting, data review, technical report and submission.
Land Remediation Relief
Investment in bringing contaminated or derelict land back into a productive state could receive a tax credit between 8p – 28.5p for every qualifying pound spent.
Aircraft design, surface treatments, adhesive bonding, manufacturing tools, methods etc.
Livestock & crop feeding, breeding, disease resistance, protection, management techniques.
Innovative strains, varieties, formulas, mixing and consistency techniques.
Developing techniques, machinery, infrastructures, drawing, HVAC, BIM, LID, etc.
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.
New drugs, species, formulas, medical devices, etc. FDA-compliant trials, screening, preclinical testing etc.
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.
New software solutions, data encryptions, algorithms, adaption of off-the-shelf solutions, IoT and smart devices etc.
Bespoke textiles, fastenings, fabric with specific properties, dye formulas, high-tech clothing developments etc.
Bespoke waste management methods, machinery, technology, purification processes, safety processes etc.
General R&D Tax Credit Info
One-page PDF that breaks down the essentials of the R&D relief incentive including the schemes, qualifying R&D activity and qualifying costs.
6 R&D Tax Credit Changes
This infographic gives a high-level overview of the six R&D tax credit reforms effective from 1st April 2023, including rate changes and the addition of cloud & data costs.
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.
This PDF explains the benefits of working with Amplifi Solutions expert team for your business and your clients. Plus some qualifying R&D questions.
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.
With Patent Box companies can apply for a 10% Corporation Tax rate on worldwide profits that are credited to qualifying intellectual property rights.