Research and Development – Tax Relief

Research and Development (R&D) tax relief and credits give a tax advantage to both small and medium sized enterprises (SME’s) and large companies undertaking qualifying activities, namely advancements in science or technology.

---

AN INtroduction

Research and Development (R&D) tax relief and credits give a tax advantage to both small and medium sized enterprises (SME’s) and large companies undertaking qualifying activities, namely advancements in science or technology. The tax relief has been available to small and medium sized companies since 2000 and to large companies since 2002. R&D tax relief is a government incentive to encourage companies to invest in science and technological activities by claiming relief on qualifying costs.

---

eligibility

It may come as a surprise for people in many industries that much of the work they undertake to grow their business can qualify for significant tax benefits. This tax relief can help fund the technological advances you need to keep your company competitive, by reducing your tax bill or providing you with significant cash back. R&D activities are not confined to companies in the technology sector.

R&D has great breadth in its definition and includes the following;

• Creating new or improved products
• Developing new processes
• Improving existing products and processes

---

Benefits

The R&D scheme works by allowing SME companies to obtain relief for 230% of qualifying expenditure. Thousands of businesses large, medium and small have already received generous R&D tax credits directly from HMRC. What’s more, your company could receive cash credits for projects worked on from as long as two years ago right up until its next corporation tax payment is due. In addition SME’s that have been in a loss situation are allowed the alternative of a cash payment if they surrender their losses to HMRC.

---

Eligible costs

• Employing staff directly and actively engaged in carrying out R&D
• Paying a staff provider for staff provided to the company who are directly and actively engaged in carrying out R&D
• Materials, both consumable and transformable materials used directly in carrying out R&D
• Water, fuel and power used directly in carrying out R&D
• Software used directly in carrying out R&D

---

AJN Accountants are specialists in helping contractors, freelancers and small businesses to save tax and time.