R&D Tax Credits – What can you actually claim for?
Have you recently been hearing a lot about R&D Tax Credits but not entirely sure what your business is allowed to claim back from the government? Don’t fear, at Alexander & Co, our Tax experts are here with this handy guide to what R&D you are allowed to claim back for your business.
Before we begin, it’s worth mentioning that only limited companies can claim, as they pay corporation tax. Sole Traders, charities and partnerships can not claim for R&D Tax Credits.
What R&D Tax Relief can you claim?
If you meet the necessary requirements for R&D, claims can be made on the following:
- Materials – including transformable or consumable materials directly used in the R&D process. Since 2015, relief is only available if those items are fully expended by the R&D activity.
- Staff Costs – Claiming for the cost of employing staff members who are directly involved in carrying out R&D itself
- Software – Claims on any expenditure on computer software used directly in R&D
- Utility Costs – Water, fuel, and power directly used in developing R&D can be taken out. However, not for things such as data costs or telecommunications.
- Externally provided subcontractors and workers – This will cover the cost of paying a staff provider, providing the company with staff, or 65% of any costs carried out by a subcontractor who is actively involved in the R&D process.
The primary guide from HMRC delves into this further. So make sure you also check out their guide to help determine what qualifies for R&D Tax relief.
Claiming R&D Relief
You can claim yourself. However, the guidance from HMRC for claiming tax credits is hundreds of pages long, which puts most businesses off doing it themselves. You may run the risk of getting it wrong, which can lead to under- claiming and over- claiming, with the latter prompting an investigation.
Your accountant is most likely to submit your company’s claim, which is made via the company’s annual Corporation Tax return,
If your company wants to convert some of the relief into a cash tax credit, this should also be noted on the Company Tax Return. You will either receive a cash tax credit from HMRC, or your Corporation Tax bill we be reduced, depending on the circumstances of your claim
A company will usually have two years from the end of the Corporation Tax period, to claim R&D tax credit
Can I claim for R&D even though I’m making a loss?
The government want companies spending money, and the more money they spend on R&D means the higher the benefit they will receive. Some loss making companies may be able to receive cash credits.
R&D Tax Relief accountants in Manchester and London