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Read moreGot questions?
For tax purposes, when a company undertakes a project that seeks to achieve an advancement in overall knowledge or capability in a field of science or technology, it is involved in R&D. The R&D scheme enables the company to either reduce its corporation tax liability, get a tax refund on previously paid tax, or, if the company is loss-making, they could receive a tax credit byproving that theyhave incurred costs on qualifying R&D.
There are primarily two types of R&D Relief based on your company size and whether or not your project has been sub-contracted to you.
If you are an SME, i.e., a small or a medium-sized enterprise, with less than 500 employees and a turnover of a maximum of €100m or a balance sheet total of less than €86m, you can claim the SME R&D Relief.
What it offers? This relief allows a company to do the following:
If you are a large company and want to claim an R&D relief, then this is the relief for you. It can also be claimed by SMEs and large companies, sub-contracted to do the R&D work by a larger company.
What it offers? The RDEC offers you a tax credit for 11% of your qualifying costs on the R&D project.
As mentioned earlier, if you are an SME, with less than 500 employees and a turnover of a maximum of €100m or a balance sheet total of a maximum of €86m, you can claim the SME R&D Relief. It needs to be noted that you need to consider the figures of linked and partner companies while calculating if you are an SME.
Projects that make an advancement in some area of science or technology will usually qualify for R&D. It doesn't have to be a ground-breaking invention orthose that happen only in white coats scientific laboratory, but it does need to achieve advancement in science or technology, and by extension the industry in some way.
For a project to qualify, the company needs to explain how the project:
Therefore R&D can include creating new processes, products or services, making recognisable improvements to existing ones and even using science and technology to replicate existing processes, products and services in a new way.
Whatever the size of your business, if you are creating new products, processes or services – or modifying existing ones – there is a good chance you could be carrying out R&D. R&D can take place in any sector. It occurs in everything from food-processing to software development, construction to healthcare.
While submitting a corporation tax return, a business must check (put ‘X’) for box 99 which is for SMEs, and the improved expenditure in box 101. However, DNS Accountants recommend that businesses should interact with members from their learned and experienced team to seek guidance and advice on making a claim. This will help the businesses to make certain that every section of the define criteria is met, and the actual spending amount corresponding to R&D can be claimed back
Businesses will be required to notify HM Revenue and Customs (HMRC) and explain them the reason for a particular R&D activity to qualify for a tax relief. Usually, there is a time range within which a business must make sure that they have filed for a relief – this period is 2 years subsequent to the end of the tax return accounting period. If a business thinks that it qualifies for a R&D tax claim, it is imperative to produce adequate records of project in case HMRC demands for them. By doing so, businesses can make sure that they have applied for the tax relief and are likely to qualify for the claim