The research and development tax credit

How the research and development tax credit could save you money

If you haven't heard of the research and development tax credit before, or are unsure of its application then it's important to review your expenditure to understand if your company can qualify for this relief. This is because your research and development (R&D) projects could provide a significant boost to your cash flow.

Unfortunately, many organisations fail to realise that their activities are eligible meaning they miss out on potential tax savings.

What is R&D tax relief?

Projects being undertaken with the aim of achieving a scientific and/or technological advance through the resolution of uncertainty in these areas of work, are classified as R&D. This means R&D doesn’t just apply to medical research and laboratory work, far from it.

If you’re improving processes in your organisation, or attempting to, then there may be a case for making a claim. Your activity doesn’t have to result in a successful service, process, or end product to qualify.

Costs associated with exploring a new idea, or initiative, may be eligible even if the project fails, or is cancelled.

How does R&D tax relief work?

R&D costs are applied to reduce your Corporation Tax liability. Under recent changes to the R&D scheme, there are various ways in which your company can potentially benefit from R&D relief, dependent on whether your company is considered small or medium sized and meets an R&D intensity condition, as well as whether the company is profit making or loss making.

The normal mechanism for this relief (if the intensity condition is not met) is through an above the line credit (“R&D Expenditure Credit”) at a rate of 20% of the qualifying expenditure, which is recognised within pre-tax income. There are then seven steps to work through to calculate the overall relief available, which will include a notional tax rate being applied to the R&D Expenditure Credit.

Where the company is small, or medium sized, and meets the intensity conditions, relief is given through an enhanced deduction of 86% of qualifying expenditure. If your business is loss making then a cash refund may be made available dependent on certain circumstances.

Questions to ask yourself:

Have you developed your own software?
Have you developed internal processes that reduce costs and improve production times?
Are you using existing technologies in a unique way? Are you using two or more existing technologies in a manner where they've never previously been combined?
Do you carry out any design work?
Do you manufacture products?
Has your organisation made advances in science and/or technology?

We have obtained claims successfully for businesses in a vast range of different areas and have saved our client base on average £1.6m per annum through R&D projects.

We find the following sectors tend to benefit from R&D related claims:

Aerospace	Automotive
Biotechnology	Construction
Defence	Engineering
Food & beverage	Manufacturing
Pharmaceutical	Software development
University spin-offs

Things to consider

Do you have new products or services in the pipeline that might qualify?
Have you reviewed your existing products or services against the criteria stated above?
Do you have any current or pending patents that might cover services or products for eligibility?
How robust are your back office reporting systems? Can they track this income accurately in the event of a review by HMRC?

What we do

Legislation concerning R&D tax claims is complex and ever changing. It requires an in depth understanding of your organisation, the law, and how it’s applied.

In the first instance we would look to hold an initial free meeting with you to explore and understand your expenditure. Relevant work and projects undertaken can then be identified. This allows us to assess the merit of a potential claim against the government’s complex eligibility criteria.

The process with our team is as follows:

Identify qualifying projects and costs
Work with you to prepare a detailed narrative and explanations about the projects being claimed for
Prepare calculations for submission to HMRC
Liaise with HMRC on any matters arising

Testimonial

Wellers changed our experience of R&D completely! They looked over our accounts and expressed their confidence in submitting a claim and explained in detail why we were in fact eligible and due significant refunds. We engaged in a couple of meetings, working through the finer details and just a few weeks later, we were over the moon to receive a large refund, just as they had advised.

Wellers made the R&D claims simple, understandable, and incredibly beneficial to our business. They have helped us to understand areas where we are eligible and assisted in adapting our business and financial records to make future claims even easier. The only regret we have is not meeting them and submitting claims sooner.

Sarah Jaycock, Executive Director at High Spec Composites

Why Wellers

By working with us you will have:

Peace of mind, as we understand the needs of your business and aren't working to just maximise a claim
Clarity courtesy of our transparent, fixed fee arrangement with no fixed contract
Confidence from our experience in dealing with HMRC and working alongside them to help clients get their claims through to achieve tax savings
Assurance, that as accountants and tax specialists, we can see the big picture, and from our wider knowledge of your business can understand the full implications of a claim
Certainty that our links with industry specialists in this field mean we understand the full validity of a R&D claim for the sector/industry in question

Fees for claims

There are many R&D specialists who will process your claim for a percentage of the saving achieved. We apply a far fairer, fixed fee formula that ensures your business can obtain a greater potential saving after professional fees have been applied.

Our fees are based on the complexity of your claim whereby the more complex the work to prepare a submission, the more time and knowledge required to:

Gather necessary information
Review documentation
Assess the eligibility of your R&D activities to identify qualifying costs
Prepare and process the claim on your behalf

This means the fees we quote are dependent on your business activities and circumstances. We calculate them based on our hourly rates and an estimation of the time required for us to perform the work.

Please note any fees we quote, and service provided, doesn't include tax investigation services. We recommend this product when making an R&D claim. This can be purchased at an additional fee, in the event of a potential HMRC enquiry into your financial affairs.

Research and Development tax credits