R&D Tax Relief – Is your business missing out?

02 Dec 2021

Charlie Thompson, Tax Consultant at WR Partners

By Charlie Thompson, Tax Consultant

Research and Development Tax Relief was introduced by the Government to provide an incentive for UK companies to undertake innovation.

However, many companies are still not claiming this valuable relief, missing out on a cash refund for overpaid company tax, a reduction in company tax now and for future years or an immediate cheque to cover some of the costs of the research and development activity undertaken.

What is R&D Tax Relief?

A tax incentive that works by providing an enhanced tax deduction for the costs incurred in undertaking qualifying research and development activity.

Broadly speaking, qualifying R&D is resolving scientific or technological uncertainties. This can include:

  • New Products, New Processes (internal or external), New Services

  • Enhanced products, processes, services with improved features, durability, reliability, efficiency, capability, resilience etc.

  • Bespoke software programs to integrate multiple systems and improve existing systems.

SME companies can claim additional relief of 130% of the qualifying expenditure.  For profitable companies this means that they can currently save an additional £247 in corporation tax for every £1,000 they spend on qualifying R&D.  With the corporation tax rate slated to increase to 25% in a couple of years then the savings will potentially be much higher.

For those companies which do not have taxable profits, they can in effect “sell” some or all of their R&D deductions back to HMRC.  The tax benefit from selling the deductions is lower but it can mean an immediate cash injection where there is currently no corporation tax to be saved/repaid. 

Case study

WR Partners recently helped a manufacturer identify a range of R&D projects that they were undertaking, including automating production processes, altering a product to become fire retardant to comply with standards after a change in regulations. This led to qualifying R&D costs of £377,688 being identified and led to the company claiming a repayment from HMRC worth £125,959.

Our experienced team can work with you to explain the tax relief in detail, help identify qualifying activity and costs and prepare a report explaining this to HMRC.

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