R&D Tax Relief

Research and Development Tax Credits

R&D tax relief is designed to incentivise investment in R&D. The scheme was introduced in 2000 for SMEs, with a separate scheme for large companies added in 2002.

Any company carrying out new product development R&D is likely to qualify for the relief. The definitions of eligible R&D and costs are reasonably broad, and eligible R&D can be found in unexpected areas, hence the need for expertise in claiming for the right projects and the correct costs.

There are various principles which, detailed in the department of innovation and skills (“BIS”) guidance need to be respected. Put simply, eligible R&D must be:

  • seeking to achieve an advance in science or technology
  • be subject to scientific or technological uncertainty
  • be conducted in a systematic way

Eligible costs include staffing costs, consumable costs, software, subcontractors, qualifying indirect activity costs and research contributions. Critically these costs must be mapped to the eligible activities start and stop points within a commercial project

1Benefits of the scheme

The benefit of the reliefs range broadly from 7.9% to 32.63% of identified and qualified eligible expenditure depending on whether you are a large or small company. The definitions of large and small company size are driven by the EU classifications and UK modifications including revenues, number of employees and balance sheet value.

The SME scheme works by allowing the SME to deduct an additional enhancement of its eligible R&D costs from its taxable income. If the company has made a loss, then the scheme allows a cash payment at a proportion of the eligible R&D investment. The Chancellor announced in his March 2014 Budget that, with effect from 1 April 2014, this payable percentage is to be increased to 32.63% of the original R&D expenditure for SMEs.

He further announced in his 2014 Autumn Statement that the uplift rate for the SME relief has been increased from 225% to 230%, from 1 April 2015, providing a benefit of 26% of the qualifying expenditure. The rate at which losses can be surrendered for a payable credit under the SME scheme stays at 14.5%, so loss making SME’s can receive a cash credit of 33.35 pence (previously 32.63 pence) for every pound spent on qualifying R&D.

A large company is able to claim an additional 30% of its eligible R&D costs from its taxable income (a super-deduction). And with effect for qualifying expenditure incurred after 1 April 2013, the government has introduced the R&D Expenditure Credit (“RDEC”) scheme which operates above the tax line, alongside the existing super deduction scheme. This will make it possible for large companies to claim payable tax credits at a rate of 10% becoming- 11% of qualifying expenditure. See here for details

2R&DTR and MMP

Every company is different, so we adapt our methodology to your company, leading to a bespoke service for each of our clients. Through focused financial and technical interviews, MMP determines eligible R&D activities being carried out by your company and maps them to eligible costs.

To maximise your claim but minimise your time commitment, we then detail our findings in a technical and financial report that is submitted to HMRC. We manage the entire claim approval process with HMRC to ensure that your claim and payment is delivered as quickly as possible.

All sizes, all types

All sizes and types of companies

From start-ups to the FTSE100, MMP has seen it all. We are committed to providing excellent service, doing all the heavy lifting, delivering robust claims in the shortest timeframe possible, enabling you to receive your cash or tax relief as quickly as possible.

MMP has a wealth of experience in claiming complex technology tax reliefs and would be delighted to discuss any aspect of the scheme with you.

MMP founders have sat on the government’s R&D Tax Relief committee for many years providing an insight of, and input to, the regimes as they develop and change over time. It also enables us to understand what HMRC’s priorities are such that claims can be tailored to reflect their assessment needs.

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