To stimulate innovation and product development, the UK Government provides support to companies through the R&D tax credit scheme. Despite the name, this money does not just go to reducing your tax bill but can be paid out in cash, normally within 6 weeks of a claim being submitted.

SME’s can claim back up to 33% of their R&D costs, with the average yearly claim size being £60,000. Large organisations can also take advantage of this scheme. UK companies greatly benefit from this incentive, as it allows them to spend more money on innovation and product development. Although the cash generated from this can be used however you would like.

What qualifies as R&D?

There is a common misconception that the term “R&D” is reserved for describing work carried out by scientists in white coats in a lab. In reality, R&D is a much broader term for the innovation and product development process, anything where there is a risk of failure. You don’t need an R&D department or science qualification. If your project presents “an advancement” in a particular science, engineering or technology, then you’ve likely undertaken activities that qualify for R&D tax credits.

Many companies working on low-carbon projects such as construction or energy are eligible for the scheme!

How do I claim or R&D tax credits?

It is best to work with one of the specialists in R&D tax credits, most accountants do not have a great knowledge of this system.

In order to apply for R&D tax credits, you must put together two reports.

  • Financial report: A report calculating the costs related to your R&D projects. These include employee costs, contractor costs and consumable costs.
  • Create a technical report: A report that details how your R&D project fit within the qualifying criteria for R&D tax credits. This should describe the challenges you faced in your project roadmap and how you tackled them. Failed projects qualify too!

Most well put together claims go through without a hitch.

Occasionally, HMRC may request more information to evaluate your claim. These don’t usually present any problems, but it’s best to have an expert represent you.

Have any questions about the process? Get in touch with us at hello@kapitalise.co.uk for a free evaluation. Don’t miss out on your R&D money!

For example

Specialist Civils contractor with around 150 employees developed a new way of build foundations without disturbing listed buildings that were in close proximity to the building site for a project.

They were told by their accountant they did not qualify.

After we reviewed their innovations, we found many projects they did were within the scope of HMRC’s definition of research and development.

They were also surprised to learn that the new building foundation modelling software they had built to help their business was a qualifying R&D project. They received more than £300,000 from the HMRC.

Author: Matt Tudge