What is R&D tax relief?
For companies developing products, processes and services, R&D tax relief can provide an important source of funding through cash reimbursement or tax deduction. It is one of the biggest tax reliefs available to SMEs and can be worth as high as 33.35% of a company’s R&D expenditure.
The relief is ultimately geared towards problem-solving businesses. Under HMRC guidelines, R&D is a project or activity, which “seeks to achieve an advance in science or technology [through] the resolution of scientific or technological uncertainty.” This definition is deliberately vague, as to open the relief up to as many businesses as possible.
It is worth noting that R&D is still deemed to have taken place even if that project is not successful – ultimately it’s the “seeking” that matters.
For businesses that have just become aware of R&D tax relief, the good news is that claims can be made retrospectively. By amending your CT600, you can file a claim for R&D activity carried out in the past 2 years.
Some examples of companies that might be eligible for R&D tax relief are:
- An IT company integrating new software in its products or developing systems for its customers
- An engineering company developing its manufacturing process by exploring new cost effective materials
- An architect looking to improve the efficiency of energy use in a house or building
- A digital agency improving the performance of an app or website
- A veterinary referral company performing complex experimental techniques and surgery