R&D Credits

For Founders, By Founders

Overview and benefits

Many of our clients run innovative businesses that are pushing the boundaries of their fields with products and services built on cutting-edge technology. Such companies, in most cases, can largely benefit from R&D tax credits, recovering significant percentages of their investment.

What are R&D Tax Credits?

R&D Tax Credits are put in place by HMRC to encourage those companies that work on science and tech projects and are making advances in their respective fields.

On average, companies that work on R&D projects claim £46,000 each year as tax reliefs, as a support from the government to innovative science and tech businesses. These reliefs are available both as 46% of your R&D spend off your Corporation Tax payable, or as 33.5% cash back. Here at Ignition, we helped a range of scale-ups like ClauseMatch get this type of funding for their R&D projects.

Are you eligible for R&D Tax Credits?

In order to be eligible, you need to show how your project tried to overcome an uncertainty while looking for an advance in science and technology that a professional in the field couldn't easily work out. The allowable expenditure includes staff costs, subcontractors and freelancers you hired for the project completion as well as consumable items you used. You can book a free consultancy with Ignition to learn more about how much spend, depending on your project, you can claim R&D reliefs for.

Show that you looked for an advance in the field

Said advance, as Revenue and Customs specify, needs to contribute to your whole field. Not just your business. In short, an eligible project must aim at creating a product, process or service that no one else has accomplished in your field before.

Show that your result wasn’t certain

A second requirement is that your project can’t be known to be feasible until you’ve completed it. That’s why you’ve invested in R&D in the first place!

Explain the process you went through to reach the advance

HRMC requires you to document how you used R&D to complete your project. That should include the whole process of research, testing and analysis that brought you to the development of your new technology, product or service.

Show that professionals in your field couldn’t have done the same

Finally, you will need evidence that other experts were trying to overcome the same issue and failed. Alternatively, you can show how people working on your project are industry experts themselves, and get them to explain the uncertainties and challenges involved in your project.

What are your options when claiming R&D Reliefs?

There are two main ways for you to benefit of these reliefs:

Option 1: 46% of your R&D spend off Corporation Tax payable

A profitable Scale-Up can claim an enhanced expense of a further 130%. For example, £100k of R&D becomes a deduction of £230k against taxable profits and reduces the tax bill by £46k (£20k being corporation tax relief, and £26k being the enhanced R&D relief).

Option 2: 33.35% of your R&D spend as cash back

A loss-making Start-Up can request a tax credit to be repaid to the company. This is at 14.5% of the loss. For example, an R&D spend of £100k is firstly enhanced to £230k and then relief calculated at 14.5% results in a refund of £33.35k, which is roughly 33% of your initial spend.

 

You can download our one-page PDF guide to R&D Tax Credits by completing the form below.



Our Expertise

Revenue and Customs is often unwilling to review claims due to companies often overstating their expenditure.

As an ICAEW regulated firm, we can help Founders get these benefits by identifying qualifying costs (including proportion of staff costs involved in R&D or project managing) and argue the case with HMRC.

That can take a lot of time and effort, but it sure does pay back and we are here to support you all the way!

Feel free to give us a shout for a free consultancy if you’d like our help in getting this funding.

A solid R&D report and service devliery! We received our money far quicker than expected. Our recommendations.

Evgeny Pikalov

Finance Director – ClauseMatch

Request 1hr free consultation