Find out if you can claim Corporation Tax relief on your Research and Development (R&D) project.
R&D reliefs support companies that work on innovative projects in science and technology. It can be claimed by a range of companies that seek to research or develop an advance in their field. It can even be claimed on unsuccessful projects.
You may be able to claim Corporation Tax relief if your project meets HMRC's definition of research and definition.
Projects that count as R&D
The work that qualifies for R&D relief must be part of a specific project to make an advance in science or technology. It can’t be an advance within a social science like economics or a theoretical field like pure maths.
The project must relate to your company’s trade - either an existing one or one that you intend to start up based on the results of the R&D.
To get R&D relief you need to explain how a project:
- looked for an advance in science and technology
- had to overcome uncertainty
- tried to overcome this uncertainty
- couldn’t be easily worked out by a professional in the field
Your project may research or develop a new process, product or service or improve on an existing one.
Show that you looked for an advance in the field
Your project must aim to create an advance in the overall field, not just for your business. This means an advance can’t just be an existing technology that has been used for the first time in your sector.
The process, product or service can still be an advance if it’s been developed by another company but isn’t publicly known or available.
Show that there was uncertainty
You should be researching or developing something that isn’t known to be scientifically or technology feasible when you make or discover it.
This means that your company or experts in the field can’t already know about the advance or the way you achieved it.
Explain how you tried to overcome the uncertainty
You should show that the R&D needed research, testing and analysis to develop it.
You need to be able to explain the work you did to overcome the uncertainty. This can be a simple description of the successes and failures you had during the project.
Show that a professional in the field couldn’t work this out
You should explain why a professional couldn’t easily work out your advance.
You can do this by showing that other attempts to find a solution had failed.
You can also show that the people working on your project are professionals in that field and get them to explain the uncertainties involved.
Types of R&D relief
There are different types of R&D relief depending on the size of your company and whether the project has been subcontracted to you or not.
Small and medium-sized enterprises (SME) R&D Relief
You can claim SME R&D relief if you’re an SME with:
- less than 500 staff
- a turnover of under €100m or a balance sheet total under €86m
You may need to include linked companies and partnerships when you work out if you’re an SME.
SME R&D relief allows companies to:
- deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction
- claim a tax credit if the company is loss-making, worth up to 14.5% of the surrenderable loss
Research and Development Expenditure Credit
This replaces the relief previously available under the large company scheme. Large companies can claim a Research and Development Expenditure Credit (RDEC) for working on R&D projects. It can also be claimed by SMEs and large companies who’ve been subcontracted to do R&D work by a large company. The RDEC is a tax credit for 11% of your qualifying R&D expenditure up to 31 December 2017 and 12% from 1 January 2018.
HMRC information sourced from https://www.gov.uk/guidance/corporation-tax-research-and-development-rd-relief
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