How Companies Can Claim Research and Development Tax Credit

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When you are running a business, you have to take care of a lot of things – cash flows, financial situations, taxes etc. This is in addition to delivering good quality products to your customer. The challenge is even more, when your business or company is working on research and development oriented products. When your company is research oriented, the capital expenditure is very high and the risk involved is also high – since you are not sure about your end product. But such companies are very essential for the economic growth of the country. Companies which are research and development oriented are very essential to a growing economy and they are the need of the hour. So, the UK government has come up with schemes to promote such companies. One such scheme is the Research and Development Tax credit.

What is Research and Development Tax credit?

As the name indicates, it is the credit – in terms of money that is provided by the government for the companies that are research and development oriented. Your capital expenditure in running the company – your staff cost, contractor and sub-contractor costs, software costs and material costs can be availed from the government in terms of money when you claim for this credit.

How Companies Can Claim Research and Development Tax CreditThe terms and conditions

To avail this facility, you need to prove to the government that your company is research and development oriented. You need to satisfy the following conditions to avail this facility:

–  If your company is working on medical science research/ technological research/ any advancement of technology in general – which will help the larger section of the society, then your research will qualify to avail this tax credit.

–  Your company must be paying corporate taxes to avail this facility, since this credit is deducted from your corporate taxes. Essentially, you will be paying lesser taxes since the taxes would now be the difference of your actual taxes and the amount you get as credit from the government. To be eligible, you should be paying corporate taxes for a minimum of 2 years before you could avail the credit from the government.

–  Your company credits should be large enough to self-sustain – meaning that your company should not be dependent only on the tax credit provided by the government to sustain and grow.

–  Research in the field of arts, humanities, economics or social sciences does not qualify for research and development tax credit.

Facts to know

These are some important facts to know for companies that can avail the Research and development tax credit:

–  All companies – SME, large companies or start-ups can avail this facility – provided you are able to certify that you are working on research and development to help the larger masses of population.

–  You can file for the research and development tax credit along with your normal CT (corporate tax) filing. The HMRC does not make it mandatory for you to provide details of your projects at the time of filing for this credit. However, it is good if you could provide some details of your research activities and the costs incurred in your project during the time of availing this credit facility.

–  The tax credit ( is basically provided by the government as an incentive to invest more in the development of innovative and creative technology products.

–  The cash benefit that you get from this scheme can only be used for the efficient running of your business/company/project.