There is a variety of tax reliefs available to small companies which are advocated by HMRC and can be used to save tax through clear and authorised methods. One such scheme is Research and Development (R&D) tax relief. This is a government incentive designed to encourage innovation by UK businesses. R&D tax relief can be equivalent to up to 33p for every £1 spent on qualifying expenditure.

This can be an extremely attractive taxation relief which is available to many trading companies which participate in activities meeting the definition of research and development. Many business owners have heard of this, but fewer actually realise that costs which have been incurred are eligible for relief.

What counts as R&D?
Whatever its size or sector, if your company is taking a risk by attempting to ‘resolve scientific or technological uncertainties’ then you could qualify.

This means you might be:
• Creating new products, processes or services
• Changing or modifying an existing product, process or service

R&D doesn’t have to have been successful to qualify, and you can include work undertaken for a client as well as your own projects.

What costs can I claim for?
An R&D tax credit claim might include staff costs, subcontractor costs, materials and consumables and even some software costs.

Is my business eligible?

There are various tests which are applied in determining whether a company has incurred R&D expenditure. Crucially, R&D activity is distinguished by the test of whether there is presence of an appreciable element of innovation. If the activity breaks new ground it is likely to be included. However, if the activity follows an established pattern it is normally excluded. If expenditure does qualify as R&D, and the company is eligible, the tax relief available is extremely generous. 230% of the total eligible expenditure is deductible for corporation tax purposes. In addition to this, if the company is loss making, the company can claim a tax credit immediately, thus improving cash flow. Here at Frost Wiltshire, we can talk through the company expenditure with you and establish whether we believe the company is eligible for R&D relief. We can then prepare and submit your claim for you, which will include a full report plus calculations.

We offer a range of services alongside R&D tax credit claims, and as such can take on all your business and personal compliance needs alongside this more specialist area if you would like us to. If you are interested, please contact Mel Hackney or Steve Wiltshire on 0117 304 8455 to arrange a free initial consultation.