Did you know that 40% of companies in the UK generate some form of innovation, whether this be a new product, service or business process? Despite that, most business owners are completely unaware that they qualify for money back from the government – make way for R&D tax credits! What are R&D tax credits? Research and development (R&D) tax credits are a method of tax relief that incentivises the use of R&D by UK businesses and their investment in innovation. The scheme allows companies to claim credits as a percentage of their R&D expenditure, which ultimately reduces their tax bill. What costs can I claim for? When you are putting together a claim for R&D tax credits, there are several types of expenses that can be considered. These include: Staff costs, including salaries, employer’s NIC and pension contributions. Subcontractor or freelance costs. Materials and consumables including heat, light and power that are used up or transformed by the R&D process. Some software costs. Overhead contribution. How can I claim? We have teamed up with Brown Butler, a well-established and reputable firm with HMRC to ensure the claim is maximised and processed efficiently. The process to claim is as follows: Assess your qualified R&D activity. Calculate the qualifying R&D expenditure. Submit the figures on your CT600 tax return. A company can claim a tax deduction of 230%, with the 100% of expenditure incurred plus an enhanced expenditure of 130%. Can I make the claim myself? There is no reason who you cannot make the claim yourself. However, it is likely the claim will be incorrect, claiming too much or too little. It is also likely that HMRC will review the claim in more detail as you will have no claim history with them. If the claim made is proven to be incorrect HMRC may also charge penalties. What if I make a loss? HMRC will pay out in cash 14.5% of the claim identified R&D tax credits when the company is in a loss making position. Alternatively, if the company is expected to return to profit in the near future the loss can be carried forward for a relief at 20%. What costs are associated with this? If you were to work with us, the fee is 25% of the tax refund received. The invoice will only be raised when you get the benefit of the relief (by means of refund if in the prior year, or reduction in tax liability if in the current year). By way of example: If there are R&D costs of £50,000 the “uplift” would be £65,000 (130%). The tax benefit would be £13,000 (20% x £65,000). The fee would be £3,250. The “net” benefit would be £9,750. For more information, you can also download our free leaflet about R&D tax credits or get in touch with us for a discussion.