If you’re a tech start-up based in the UK, then it’s likely someone will already have told you about R&D tax credits. If not, it’s a scheme worth finding out about.
R&D tax credits enable certain UK companies to claim some of their expenditure back either as cash or as a reduction in corporation tax. If you’re involved in research and development that qualifies for the scheme and meet the relevant structuring and expenditure criteria, the credits can generate considerable savings.
Qualifying for R&D tax credits: your research
To qualify, your research work must seek to create technological progress and can’t be something you’d reasonably expect a competent professional to complete without the need for further research.
The following questions should give you an idea of whether you could qualify.
Is your research intended to:
- Extend knowledge in science or technology?
- Create a process, material, device, product or service that will increase knowledge?
- Improve an existing process, material, device, product or service?
- Use science or technology to develop an existing process, material, device, product or service in a new way?
If you’ve answered yes to any of those questions, you’ve got a good chance of qualifying for R&D tax credits.
Qualifying for R&D tax credits: your structure
As well as being involved in relevant research, you must fund the work you are claiming for directly from a UK company. And if you want cash back you must meet the SME qualifications, which if you are a startup, you very likely will!
How to claim
If you believe your work and spend qualifies, the next step is to contact HMRC, documenting your work and adding supporting calculations showing the percentage of time your contractors and employees spend on your qualifying research and development. HMRC will then make a decision about whether you qualify based on your calculations.
HMRC’s interpretation of this legislation has been pretty consistent and the key is to show that you understand in detail what constitutes qualifying R&D from a tax perspective.
Find out more
If you want to ask any questions please just e-mail firstname.lastname@example.org