Everything you need to know about R&D Tax Relief | Jackson Stephen

Everything you need to know about R&D Tax Relief

3 mins

Our industry-focused technical approach enables us to identify potential R&D activity ac...

By Steve Crompton

Partner – Head of Tax

Our industry-focused technical approach enables us to identify potential R&D activity across the business to successfully make a claim for your company.

R&D tax relief is on average up to 33p for every £1 of qualifying expenditure.

1. What is R&D Tax Relief?

Research and Development (R&D) Tax Relief is one of the UK’s most GENEROUS tax reliefs. It is designed to encourage innovation and increase spending on R&D activities for companies operating in the UK.

However, not all companies who qualify are aware that they may be undertaking R&D for tax purposes!

R&D Tax Relief enables companies that incur expenditure in developing or improving products, processes, software, or services to receive a corporation tax deduction or cash payment from HMRC of up to 33.35% of the company’s total qualifying R&D spend.

The average R&D tax benefit claim in the UK for SME’s is £57,330.

Companies can claim R&D Tax relief for accounting periods ended within the past two years.

  • Recover cancelled or failed project investment 
  • It does not have to be a new innovation to qualify
  • Project success is not a requirement
2. Who is eligible for R&D Tax Relief?

Any company (irrespective of the industry they are in) may be eligible for R&D Tax Relief. To benefit from R&D tax incentives, you must:

  • Be a limited company in the UK that is subject to Corporation Tax
  • Have carried out qualifying research and development activities
  • Have spent money on these projects
3. What qualifies as R&D activities?

R&D activities relate to projects that are focused on creating a level of improvement or advancement.

  • Developing new products, processes, or services
  • Changing or modifying existing products or services

These activities must have an element of challenge where the answer or solution is not apparent or easily deductible.

4. What costs are eligible for R&D tax relief?

During the R&D tax claim process, our specialist team will analyse the expenditure across the business to carefully identify what activities relate to qualifying R&D and develop the best methodology for your business to ensure the maximum benefit.

The qualifying costs would include:

  • Staff salaries
  • Subcontractor work
  • Materials and consumables
  • Certain software costs
  • Utility costs

If you would like to find out more or speak to one of the tax experts, email us at tax@jsllp.co.uk