Research & Development (R&D) tax relief for Limited Companies in the UK was first introduced by HMRC in 2000 and many companies have previously missed opportunities to claim this generous tax relief.
From our experience, businesses have preconceptions that they ‘don’t do’ R&D, or that it’s such a small investment that it’s not worth making a claim, but often it’s surprising how much a claim can be worth. Others are put off because they believe it’s only heavily scientific or technological projects that qualify – but that is simply not the case. As experts in R&D tax credit claims, BHP take a ‘step back’ to really focus clients on thinking about what R&D they carry out without even realising.
It is a common misconception that R&D claims are only associated with hi-tech industries which is again not the case. As well as innovation on new products, claims can be made for modifying existing products, processes or systems. Whatever sector a company operates in, if a challenge has arisen when trying to resolve technological or scientific uncertainties, there is a possibility of making an R&D claim.
A company can save a further 26% of qualifying R&D spend where the company is profitable, on top of original expenditure, this is a Corporation Tax saving of 46% of R&D expenditure. Furthermore, where a company is loss making, a repayment can be claimed back from HMRC which is worth up to 33% of qualifying expenditure.
The incentive of R&D is to encourage innovation amongst UK businesses and at BHP we have a hugely successful track-record of working with companies to ensure they take full advantage of all the relief available to them.
The qualifying expenditure covers the cost of staff working on R&D projects, expenses relating to materials and equipment as well as costs for subcontractors that have assisted with such projects. Even R&D projects that have been unsuccessful are eligible for the relief.
With the introduction of a more generous R&D scheme for large companies and increasing awareness amongst companies and advisors of the scope of R&D relief available, the number of companies claiming R&D tax relief increased by 20% in 2016. The total R&D relief claimed in 2016 was £2.9bn, of which £1.3bn was paid to SMEs.
At BHP we welcome the opportunity to talk to businesses about exactly what they do in order to identify any qualifying R&D activity. Our aim is to make it easier for clients in a wide range of sectors to benefit from R&D tax relief.