Insights

A successful claim for R&D tax relief can enable a company to achieve an additional corporation tax saving of up to 26% of the total amount spent on an R&D project. It’s a very valuable tax relief and if your company is entitled to make a claim, it’s important that you don’t miss out.

In 2013/14, businesses received £1.75bn in R&D tax relief, an increase of almost £750m since 2009/10. Plus, for each £1 of tax income ‘lost’ to the treasury through R&D tax relief, between £1.53 and £2.35 of additional R&D investment was stimulated, according to reports by CCH. This indicates the scheme is working well and is a clear win-win for companies and the government. Judging by this performance it is unlikely to be withdrawn in the short term, as we consider what changes the Chancellor will introduce in his March 2016 Budget.

Over the past few years, RJP has worked with many clients to identify opportunities to claim R&D tax relief. This involves evaluating projects undertaken to explore whether they will qualify, writing reports on the company’s activities for submission to HMRC, calculating the amount of relief and the most beneficial claims to be made and submitting claims on behalf of clients. Looking back at some of the applications submitted, this has resulted in some very significant financial support for a wide range of companies. Perhaps what is most interesting is the diversity of industries that have benefitted. It’s not at all what one would expect, demonstrating the government’s broad definition of what constitutes R&D.

The types of industries for which claims have been made and the typical amounts of the claims are as shown below. The list clearly illustrates how diverse the businesses that can access R&D tax credits are.

Industries that have qualified for R&D tax credits

• Purchasing - £ 29,000
• Information management - £490,000
• Not for profit software and consultancy - £20,000
• Industrial manufacturing - £25,000
• Website design - £66,00
• Factory management - £100,000
• Automotive components - £110,000
• Travel - £55,000
• Security management - £60,000
• Equipment testing - £53,000
• Software development - £50,000
• Marketing - £18,000

New Advance Assurance Scheme

The government seems determined to make R&D tax credits accessible to an even wider audience of UK companies. In November 2015, it introduced Advance Assurance, to provide further help to businesses wishing to make claims. This works by providing companies with a facility to apply in advance to check whether their project will qualify for relief. Following this approval, HMRC will allow their claim for the first three accounting periods without further enquiry provided the company fulfils three key criteria:

• It hasn’t claimed R&D tax relief before;
• It has an annual turnover of £2 million or less; and
• It employs 50 or fewer members of staff.

However, this scheme does have drawbacks because providing insufficient information not undertaking sufficient due diligence before the application is made could mean advance assurance is not granted, making it much more difficult to make a claim. In addition, because the rules governing R&D tax credits are complex, companies using Advance Assurance may not claim everything they are entitled to – for example, some projects may only qualify in part but may still have allowable expenditure.

If you are interested in considering your company’s eligibility for R&D tax relief, RJP can help you to:

• Identify whether projects you are undertaking could potentially qualify;
• Review your financial records to estimate how large a claim to expect; and
• Prepare, submit and agree your claim with HMRC.

Fees are charged based on the amount of the successful claim, so there is no risk to you.

If you would like to discuss eligibility for R&D tax credits, please contact Lesley Stalker by emailing las@rjp.co.uk.