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R&D Tax Relief

You may be able to claim Relief of up to 43.7% on every £1 qualifying cost.

Research and Development (R&D) Tax Credit Scheme

The Research and Development (R&D) Tax Credit scheme is an initiative by the UK Government where the incentive is designed to reward small and medium sized UK enterprises for investing in innovation and R&D. Companies can reduce their tax bill or claim payable cash credits as a proportion of their R&D expenditure.

They are a valuable source of cash for businesses to invest in developing their research and development activities, new staff recruitment and ultimate growth of the enterprises. R&D tax credits are considered to be the biggest single funding mechanism provided by Government for investment in business.

If you are an SME you could receive a tax relief of up to 43.7p per £1 spent on qualifying R&D expenditure. If the company is in losses, you could claim a cash grant of up to 33.35p per £1 spent on qualifying R&D expenditure.

How R&D Tax Relief Works

Consider an engineering consulting company with 2 employees (including director), with a profit of £75,000. The company’s corporation tax liability (@19%) payable before the R&D claim is £14,250.

Out of its total expenses, business incurred £25,000 that qualified as R&D expenditure eligible for the Small or medium sized enterprise (SME) R&D Tax Relief. Under the SME relief the qualifying R&D expenditure is enhanced by 230% and the relief works as follows:

Profit before R&D tax relief £75,000
Deduct R&D Enhanced expenditure (£25,000 x 230% = £57,500) (Note: £25,000 was already deducted from the company’s profits). (£32,000)
Revised Profits for tax year 31st December 2019 £43,000
Corporation Tax Payable (£43,000 x 19%) £8,170

The company is able to save an additional £6,080 in Corporation Tax and received a relief of 43.7 pence per £1 of expenditure on R&D.

If the company was loss making company, it could surrender the loss to HMRC in exchange of 14.5% credit against the total enhanced expenditure. This means company could receive a cash grant of £8,337, which is equal to 33p per £1 of R&D expenditure.

With DNS, you just have to complete a short online application form, and you’re done! Our limited company accountants are passionate about helping you with tailored advice on being tax-efficient and growing your business.

Eligibility Criteria for R&D Tax Credits

  • You should have a limited company in the UK which is subject to corporation tax.
  • You need to be carrying out qualifying research and development activities.
  • You have spent money on R&D activity.

How DNS Accountants can help you?

  • DNS has 100% success rate for all claims.
  • Future claim opportunities are identified, planned and developed.
  • We work on a ‘No Claim - No fee’ basis.
  • Minimum requirement of your time.
  • We maximise the claim value by doing thorough review of your business.
  • Claim activities are effectively co-ordinated and communicated both internally and externally.
  • We have in-house technical R&D Tax experts, providing you trust and assurance that you are in safe hands. We also deal directly with all the HMRC enquiries (if any) after the claim has been submitted.

Please get in touch with our experts today to find out more!

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