R&D Tax Credit Specialists

How our Accountants can help you!

• Identifying What R&D Tax Credits Are

  R&D tax credits are a UK government incentive designed to encourage businesses to invest in innovation. If you are a UK limited company that spends money on development, you may be eligible for these credits. R&D is a broad term that encompasses a variety of activities, including:

  1. Developing new products or services
  2. Pioneering new ways of solving problems in your sector
  3. Employing staff to manage or work in innovation
  4. Buying plant and equipment to facilitate innovation
  5. Investing with contractors or freelancers
  6. Spending on assets, such as buildings, labs or testing facilities

  These activities can all help your business to grow and thrive, and the R&D tax credits can provide valuable support.

  For tax purposes, R&D takes place when a project seeks to achieve an advance in overall knowledge or capability in a field of science or technology.

  R&D Tax Relief is a Corporation Tax (CT) tax relief that may reduce your company’s tax bill if your company is liable for CT or, in some circumstances, you may receive a payable tax credit. Where the company has paid the tax bill the R&D tax relief credit may result in a tax refund.

  For tax purposes, R&D takes place when a project seeks to achieve an advance in overall knowledge or capability in a field of science or technology.

  R&D qualifying expenditure is broadly includes the following

  1. Direct R&S staff costs – our company can claim for salaries, wages, class 1 NIC and pension fund contributions for staff directly and actively engaged in the R&D project.
  2. Externally provided R&D Staff (HMRC refer to this as EPW – Externally Provided Workers) – These are the staff costs paid to an external agency for staff who are directly and actively engaged in the R&D project — these are not employees and subcontractors. Relief is usually given on 65% of the payments made to the staff provider. Special rules apply if the company and staff provider are connected or elect to be connected.
  3. Subcontracted R&D – Your company can generally claim for 65% of the payments made to unconnected parties. The subcontracted work may be further subcontracted to any third party. Special rules apply where the parties are connected or elect to be connected.
  4. Consumable items – Your company can claim for the cost of items that are directly employed and consumed in qualifying R&D projects. These include materials and the proportion of water, fuel and power consumed in the R&D process
  5. Software directly used in the R&D – Your company may claim for the cost of software that is directly employed in the R&D activity.
  6. Prototypes – Where a prototype is created to test the R&D being undertaken, the design, construction and testing costs will normally be qualifying expenses.

  What costs do not qualify.

  Not all costs qualify, and you cannot receive R&D relief for:

  1. The production and distribution of goods and services
  2. Capital expenditure under either of the R&D relief schemes. However, a generous 100% Research and Development Allowance may be due on capital assets, such as plant, machinery and buildings used for R&D activity
  3. The cost of land
  4. Payments for the use and creation of patents and trademarks, as these are the cost of protecting the completed R&D.
• Preparing The R&D Report For HMRC

  When calculating a limited company’s R&D claim the process can vary, however, we find majority of cases would likely include the following steps:

  1. Initial consultation

  We would meet with the company to discuss their R&D activities and gather information about their projects and expenses.

  2. Eligibility assessment

  We would use the information gathered during the initial consultation to determine which activities and expenses qualify for the R&D tax credit.

  3. Calculation of R&D expenditure

  We would calculate the total amount of R&D expenditure for the company, taking into account all eligible activities and expenses.

  4. Preparation of technical narrative

  We would prepare a technical narrative that explains the company’s R&D activities, the purpose of the project, and how the R&D expenditure was calculated.

  5. Submission to HMRC

  We would submit the technical narrative and the R&D expenditure calculation to HM Revenue and Customs (HMRC) along with the appropriate forms to claim the R&D tax credit.

  6. Claim review and follow up

  We would review the claim and follow up with HMRC if necessary to ensure that the R&D tax credit is processed in a timely manner.

  7. Finalise the claim

  We would finalise the claim and provide the company with the relevant documentation and information regarding the claim.

  Throughout the process, we would work closely with the company to ensure that all R&D activities are properly documented and reported, maximising the tax credit amount for the company. We will also keep the company informed of any changes to the R&D tax credit rules and regulations, so they can stay compliant and take full advantage of the available benefits.

• Completing Eligiblity checks For An R&D Claim

  R&D Tax Relief is available to limited companies in the UK that are conducting research and development activities. Specifically, the company must be:

  • A trading company or a company that intends to trade
  • Carrying on an R&D project that seeks to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty
  • Incurred expenditure on R&D

  The company can be a small or medium-sized enterprise (SME) or a larger company. SMEs can claim up to 33% of their R&D expenditure back as a tax credit, while larger companies can claim up to 12% of their R&D expenditure as a tax credit through the Research and Development Expenditure Credit (RDEC) scheme.

  It is also worth noting that, companies that are not profitable or have no corporation tax liability can surrender the credit for a cash payment.

  It’s important to note that only expenses that are directly related to the R&D activities are eligible for the R&D tax credit. This includes things like salaries for R&D staff, materials and consumables used in the R&D process, and some subcontractor costs. For further guidance we always recommend speaking with one of our accountants or continuing your readings on the Gov.Uk website.

• Calculating How Much You Are Eligible To Claim

  From 1 April 2015, the relief a company can get has increased to 230% on their qualifying R&D costs. Loss-making companies can in certain circumstances surrender their losses in return for a payable tax credit (currently 14.5% for small and medium companies). For expenditure incurred on or after 1 April 2023 the tax relief credit is reduced to 186% or a payable credit (for surrenderable losses) of 10%).

  Example 1 – Profit making SAME with £100,000 of qualifying R&D expenditure
  £100,000 x 130% Enhanced Expenditure = £130,000
  Tax relief/refund = £130,000 (Enhanced Expenditure) x CT rate (19%) = £24,700
  The company CT tax bill is reduced by £24,700.  Where the CT tax bill has been paid to HMRC we would apply for a tax refund of £24,700 plus statutory interest.

  Example 2 – Loss making SME with £100,000 of qualifying R&D expenditure
  £100,000 x 230% Enhanced Expenditure = £230,000
  Tax credit £230,000 x 14.5% = £33,350
  We can claim a Tax credit of £33,350

• Supporting RDEC for Large Businesses

  Yes, MJ Kane can support large businesses with their Research and Development Expenditure Credit (RDEC) claim.

  RDEC is a scheme for larger companies that are conducting R&D activities and want to claim back some of their R&D expenditure as a tax credit. Companies can claim up to 12% of their R&D expenditure as a tax credit through the RDEC scheme.

  Our team of experienced accountants has the expertise and knowledge needed to help large businesses navigate the complex RDEC system and claim the tax credit they are entitled to. We can assist with identifying eligible R&D activities, calculating the tax credit amount, and preparing and submitting the necessary reports to HM Revenue and Customs (HMRC).

  We will work closely with large businesses to ensure that all R&D activities are properly documented and reported, maximizing the tax credit amount for the company. Our team will also keep the company informed of any changes to the RDEC rules and regulations, so they can stay compliant and take full advantage of the available benefits.

  In addition, as previously mentioned, the company can surrender the credit for a cash payment if they do not have a corporation tax liability.

• Opperating As Your R&D Tax Credit Specialists

  With years of experience and a track record of success, we have the expertise and knowledge to ensure that our clients receive the full benefit of these valuable tax incentives.

  Our team of dedicated professionals will work closely with your company to thoroughly review your R&D activities and identify all eligible expenses. We will then prepare and submit all necessary documentation to the government, maximising your tax savings and providing peace of mind. By choosing us as your R&D tax specialist, you can rest assured that your company’s finances are in good hands.

  • We manage the entire process, and all contact with HMRC
  • Transparent fees. No hidden costs.
• Working Within Multiple Industries

  Our accountants and consultants have over 100 combined years of experience across a wide range of industries with specialities catering to small business and limited companies. We offer particular expertise to businesses within (but not limited to):

  1. Construction
  2. Engineering
  3. AI & Robotics
  4. Medtech
  5. Fintech
  6. Technology
  7. Software