R&D Tax credits is a great government funding scheme. If your business does anything that sounds like it might be R&D, then you should definitely look into this and collect your R&D tax credits. Here’s how much you could earn back.
Working out exactly how you could claim back can be very complicated, but here’s a simple thumb rule: as an SME, you can usually recover between 18 and 33% of what you’ve spent on R&D.
If the spend was on subcontractors, the range drops to between 12% and 21%, as HMRC caps expenditure on outsourced resources at 65%.
Your exact profit or loss position will also impact how much you recieve. Bigger losses and higher profits bring a greater tax benefit than being close to break-even point. But as a thumb rule, you’ll be able to get back 15-30% of your developers/researchers’ salaries.
Note that all the qualifying costs would normally need to have been expensed in your P&L. However, if you have capitalised some of your R&D investment, fear not, we can help.
It’s even simpler if you’re a large company. You’ll be able to get back up to 9.7% of your costs, after tax.
Not sure if you’re an SME or a large company? Find out in our handy guide!
So how do I apply?
The R&D Tax Credit filing is via something called a CT600 – a Corporation Tax Return. You need to calculate the exact figures to fill in the right boxes, and also to write a clear “technical narrative” that explains why your project qualified, and produce a calculations table that shows how you worked out the figures.
Bear in mind also that HMRC may query the figures or the narrative, so you should make sure you read up on the regulations on HMRC’s site, or in our complete R&D Tax Credits Guide.
Better yet, you could get rid of all the hassle and let GrantTree file your claim for you.
So what’s the catch?
Strangely enough, there isn’t one.
The UK government has put this scheme in place (which was already successfully applied in Canada for a solid decade) because it recognises that most growth comes from innovative companies, and most innovative companies become so by doing R&D, and so it wants to further incentivise companies to invest more in R&D.