Things You Should Know Before Claiming R&D Tax Relief

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What is R & D tax relief?

Scientifically creative and innovative companies are the need of the hour since these companies help in the advancement of the country’s economy. But, it is not easy for any company to work in this field since the risk involved in taking up such projects is serious. The capital expenditure is high, but the results are not determinable. Hence to encourage companies to work on research activities, the government has come up with an initiative called the ‘R & D tax relief. If your company is one such, then read on further, to know all about the R&D tax relief.

Your eligibility criteria

You avail the credit facility from the government; you have to meet the eligibility criteria set by the HMRC.

a.  Your company should be working on research and developmental projects. These activities should be experimental in nature. The results of which should not be easily deducible by equally competent known techniques.

b.  The project should not be subsidized. If so, it will affect the amount of tax credit that you will receive from the HMRC.


If your company meets the eligibility criteria, then you can avail the host of benefits from this scheme. This scheme allows the company to get the R & D tax credit in two forms.

1.  By providing credit: By reducing the amount of tax that you pay to the government. Essentially, the money is reduced from the net annual corporate taxes that you pay.

2.  By providing the money in terms of cash payments: This is useful if your project is not showing any profits. The money grant from the government can be used only to successfully run the research activities.

Companies eligible for this scheme:

a.  SME: If your company has less than 500 employees and your net balance sheet shows less than 86 million pounds, and also your annual turnaround is lesser than 100 million pounds, then you qualify as an SME. The R & D tax credit initiative is specially designed for such companies. With this you can benefit by claiming approximately 230% as your rate of R & D tax relief.

Things You Should Know Before Claiming R&D Tax Reliefb.  Large companies: If you have more than 500 employees and your annual turnaround is greater than 100 million pounds – you qualify yourself as a large company. It is relatively easy to claim for the R & D tax credits if you are qualified as a large company. You can claim up to 130% as your rate of R & D tax relief under this scheme.

The technical write-up:

It is very important to have a good technical write-up of your project and its details while applying for the R & D tax relief scheme. A good technical write up would state:

a.  The problem and how your research activity is aiming at solving the issue at hand

b.  When is the target date to set a resolution for the issue at hand?

c.  How and by whom is the issue being addressed?

d.  The total cost of the R & D activity along with the required bills and bill details.

e.  The day to day transaction of the project – with the research activities.

Charges and account handling: Claiming for the R & D tax relief incentive comes along with the process of running your business successfully. Since you would be involved and more concentrated on running your business and providing the right quality deliverables, there are a wide range of firms that specialize in helping you to file the tax credit incentive with the government. Browse around to find the right accountant and the right tax advisory firm to do the job would help you in a long run in claiming the Research and Development tax credit.