GrantTree’s R&D Tax calculator can only estimate of how much you’re entitled to.
Calculating your exact claim size is fairly complicated as it depends on a range of variables, like when you incurred your costs and how large your company is. We’ve explained these variables below.
If you’d like a more precise understanding of your entitlement, give GrantTree a call. Our R&D Tax experts would be happy to help.
Fundamentally, the R&D Tax Relief scheme works by letting you reclaim a percentage of your expenditure on qualifying costs like wages and raw materials. These costs must be associated with qualifying activities undertaken as part of eligible projects. Costs that apply to both qualifying and routine (i.e. non-qualifying) activities – such as utilities – must be apportioned correctly.
Now for the tricky part. Or should we say the ‘tricker’ part? Identifying all eligible costs and bucketing them compliantly into the right projects is no cakewalk.
R&D Tax Relief is made up of three schemes.
Each scheme has different qualifying criteria and costs and offers different rates of relief. You’ll need to work out which scheme or combination of schemes your company can and should apply to to maximise its funding.
Here’s how much relief you can access from each scheme:
As you can see, there’s a wide range of relief available. How much you can access from each scheme depends on two further factors: when you incurred your qualifying costs and your company’s financial position.
The government is also introducing a new merged scheme combining RDEC and SME R&D Tax Relief for non-R&D-intensive companies. This scheme will apply to financial years starting on or after 1 April 2024 and offer a maximum relief rate of 16.2%.
The government has changed the amount of funding available through the R&D Tax Relief scheme. SME R&D Tax Relief has become less generous – a move partially offset by the introduction of the R&D-intensive scheme – while the RDEC rate has increased.
These changes took effect on 1 April 2023. Costs incurred before this date will be eligible for one set of relief rates, while purchases made on or after this date will be subject to another.
If you’re claiming for a financial year straddling 1 April 2023, you’ll need to separate costs that came before it from those that came after and claim the correct relief rate for each set.
Here is a full breakdown of the different relief rates based on when you made your qualifying investment.
The last major consideration is your company’s financial position.
The SME scheme offers different relief rates depending on whether your company is profitable or loss-making. Companies that broke even receive the least relief from the SME scheme and may be able to secure more funding from RDEC. As mentioned, relief rates vary depending on when costs are incurred.
The R&D-intensive scheme is only available to unprofitable SMEs. Like the SME scheme, it offers more relief to loss-making businesses than those that broke even.
RDEC offers a flat relief rate of 10.53% on costs incurred before 1 April 2023. After this date, unprofitable companies and companies with profits greater than £50,000 can claim a relief rate of 16.2%. Companies with profits under £50,000 can claim relief worth 15% of their expenditure.
The new merged scheme, which takes effect on 1 April 2024 and is largely based on the RDEC scheme, will offer slightly more funding to unprofitable businesses.
As you can see, calculating your exact entitlement and applying for the correct amount of relief takes a great deal of work.
Applying for the wrong amount has serious consequences: claiming for too little means your company misses out on valuable funding or tax relief; claiming too much is likely to land your company with a lengthy enquiry, delaying your windfall or wiping it out entirely.
If you want to get clarity on your claim size and make sure you’re claiming for the right amount, GrantTree’s R&D Tax experts are here to help. Just get in touch, and one of our team will be right with you.
Speak to one of GrantTree’s R&D Tax experts to find out how much your company
should claim.
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