Guide to R&D tax credits for SMEs
If your business undertakes research and development (R&D), you may be eligible to claim back tax relief to help cover the cost of carrying out the work.
To qualify, R&D must be within the field of 'science and technology' – but don't let this mislead you into thinking that your company must be carrying out scientific lab work or software development.
In fact, the definition of science and technology can be quite broad. For example, a fruit farmer working on new ways to harvest apples or a textile designer who develops a time-saving sewing technique both have the potential to qualify.
Another important factor to consider is that the research you've carried out doesn't actually have to be successful. You simply have to show that you have invested in R&D - even if the project ultimately failed, your business may still be eligible for a cash payout in the form of tax relief from HMRC.
Does my business qualify for R&D tax relief?
Businesses both large and small in almost any industry sector can claim, enabling you to recoup up to 43p for every £1 spent on qualifying costs. This could translate into a cheque worth anything from a few thousand pounds to hundreds of thousands of pounds, depending on the value of the project's investment.
HMRC does not specifically exclude any sector, although it does state that projects which seek to make an advance 'within a social science like economics or a theoretical field like pure maths' are not eligible.
As part of an R&D claim you must be able to show that your company:
- Looked for an advance in science and technology
- Identified an uncertainty within a process, product or service and tried to overcome it
- Invested in this project because it couldn't be worked out easily by a professional in the field
Your project must aim to create an advance that isn't just for use by your own business – the development should have the potential for wider benefits. For further detail, take a look at the government's R&D tax relief guidance.
Need help making a claim for R&D relief?
Making a claim for R&D credits might seem daunting and time-consuming, but here at Perrys we can advise you on eligibility, and then complete the claims process on your behalf. We'll break down all the costs you can claim for. These might include:
- Staff costs including salaries, employer NIC and pension contributions
- Subcontractor costs
- Consumable items such as materials and utilities
Our expert tax advisers in this area, Emma Haines and Craig Harman, have helped many clients to claim valuable cash boosts for their businesses. So why not get in touch with Perrys to find out more? R&D could give you the confidence to take risks that might transform your company's fortunes in the long-term.