FREQUENTLY ASKED QUESTIONS
The tax relief was introduced by the Government in 2000 to encourage technological innovation amongst UK companies and improve our nation’s global economic competitiveness. The regime allows qualifying companies to claim back a proportion of the money spent on activities that attempt to achieve such innovation.
HMRC has published detailed guidelines on what constitutes R&D under the prevailing legislation. To summarise, R&D takes place for tax purposes when work is undertaken on a systematic basis in order to resolve technical or scientific uncertainty arising from the development of new or existing technology* which aims to advance the level of knowledge or capability in a particular industry beyond that which was known or available prior to the R&D activities taking place.
*technology is defined as any substance, material, device, product, process, system, service, equipment, machine, production technique, tooling, prototype, software, source of knowledge, know how, building or other technology in respect of which an R&D claim could be made.
All UK companies are eligible to claim R&D tax relief. However the rate of relief differs depending on whether your company is a Small or Medium sized Enterprise (SME) or a Large Company. The definitions of each type of company are set out below under the question entitled “What type of company qualifies as an SME?”.
SMEs are entitled to higher rates of relief than those available to Large Companies.
Unfortunately charities, sole traders and partnerships consisting of individuals are not able to claim R&D tax relief.
This depends on whether your company is making profits or losses.
If your company has made a profit then the R&D claim will reduce the amount of profits on which you pay tax. The effect of the claim is to reduce your Corporation Tax liability by 26p for every £1 which you spend on R&D activities.
If your company has made a loss then HMRC will make a cash payment to you of up to 33.35p for every £1 spent on R&D activities (HMRC refers to these payments as “R&D Tax Credits”).
If your company accounting period began on or after 1st April 2021, there is a cap on the cash payment which can be received in any one year. It is capped at £20k plus 300% of your company’s PAYE and National Insurance Contributions liability.
It may be the case that you are making profits prior to the R&D claim but following the application of the tax relief you sustain a loss from a tax perspective. In these circumstances, the amount of R&D benefit received by your company will sit somewhere between the ranges set out above depending on your specific circumstances
It may be the case that you are making profits prior to the R&D claim but following the application of the tax relief you sustain a loss from a tax perspective. In these circumstances, the amount of R&D benefit received by your company will sit somewhere between the ranges set out above depending on your specific circumstances.
The tax impact of an R&D claim is different for Large Company’s compared to SMEs. Regardless of whether a Large Company is making a profit or a loss the tax outcome is the same.
If your company has made a profit the effect of the claim is to reduce the company’s Corporation Tax liability by 8.8p for every £1 spent on innovating and problem-solving.
If your company has made a loss HMRC will make a cash payment to you of up to 8.8p for every £1 spent on R&D activities (HMRC refers to these payments as “R&D Expenditure Credits”).
The time limit for making a claim is 2 years AFTER the end of the accounting year in which you incurred the costs on R&D activities. This means you could make a claim for costs that were incurred up to 3 years ago.
If you are eligible to make a claim and do so within 9 months of the end of the accounting period in which the R&D activities take place then you can reduce or even eliminate the Corporation Tax liability due for that accounting period rather than having to wait for a refund of tax from HMRC.
Yes! Even if your project fails and the advance sought is not realised (or not realised to the extent you’d hoped for) you can still claim R&D tax relief for the failed R&D activities. What is important to HMRC is that R&D activity took place not the outcome of that activity.
An SME is a company that employs less than 500 people and which has either turnover of under 100 million Euros or a balance sheet value of less than 86 million Euros.
A Large Company is every other company that doesn’t qualify as an SME!
You can claim for funds spent on the following items as long as the expenditure was incurred as part of the R&D activities:
• Staff salaries (including bonuses, employers Class 1 NICs, pension contributions and reimbursed expenses but not taxable benefits or dividends)
• Utilities, i.e. electricity, gas, water
• Materials consumed, “transformed” or wasted in the R&D process, e.g. chemicals, raw materials, batteries, component parts, etc
• Agency workers involved in the R&D project
• Subcontractor costs, i.e. work that you contract out to another party that forms part of the overall R&D project
• Prototype development costs
• Computer software used directly in the R&D activities
• Tooling developed specifically for use in the R&D activities
All we require is 1 hour of your time – 15 minutes to determine if you are eligible and 45 minutes to gather the information we need. We will also work seamlessly alongside your accountant to ensure the claim is submitted on time following which you will receive a cash payment from HMRC or an approved reduction in your Corporation Tax liability. Our goal is to keep the time you spend involved in the claim process to the absolute minimum.
It typically takes about a month from the date the claim is submitted for you to receive the monetary benefit from HMRC.
No. This is a government-backed initiative that has been in operation since 2000. It has the full support of HMRC and the government actually introduced a number of recent measures to make the relief easier to access to encourage take-up by qualifying companies.
Indeed, the government is so keen for people to claim the relief that since the R&D legislation was first introduced the rate of tax relief available has nearly trebled!
One of the benefits of using Radish is that we minimise the risk of either under claiming what you’re entitled to or over claiming and inviting a HMRC enquiry, by using the experience gained from having made claims for our clients totalling in excess of £100m of qualifying expenditure.
Every claim we submit to HMRC goes through a rigorous quality control process which ensures we have the utmost confidence in the accuracy of our work.
However as the UK tax system is based on the principle of self assessment, HMRC does have a legal duty to check that companies are paying the correct amount of tax. As such HMRC may, on occasion, ask some questions about a claim, however, these are usually routine queries for clarification on a particular industry specific technical point which are typically resolved quickly and without further enquiry.
For the avoidance of doubt our fees include a comprehensive HMRC enquiry defence service. Our tax team, which includes ex HMRC tax inspectors, has successfully defended all HMRC queries raised to date.
We also have a 100% R&D claim success record.
Your claim with Radish
Yes this is possible. However, you need to consider whether it is worthwhile spending the time required to read through the legislation, HMRC guidance and BIS Guidelines to make a claim yourself only to potentially get it wrong and trigger a HMRC enquiry.
Instead, you can take 1 hour of your time up and secure the maximum amount of savings available in the shortest possible time frame, with the minimum input required from your team. Our fees can be paid from the tax refund/saving and you don’t pay us a penny until you receive your cash payment/tax benefit from HMRC.
In theory this is possible and some accountancy firms do have the tax expertise to prepare and submit R&D claims.
However, many companies wrongly assume that because R&D relief is a tax planning matter that their accountant would have already approached them if a claim was relevant to their trading activities. The reality is that HMRC estimates that of all those companies in the UK who are potentially eligible to make an R&D claim only about 5% have ever made a claim since the year 2000! As such hundreds of thousands of companies are missing out on a relief that was not only specifically designed for them but which HMRC actively wants them to claim.
It may be the case that your accountant lacks the time, resource or expertise to advise you on R&D tax relief so why not work with a specialist like Radish to help you get back the cash that you are legitimately entitled to claim.
Your accountant may be correct. However, as R&D tax specialists with years of experience behind us we are often able to find genuine eligibility where a non specialist (most accountants) cannot.
1. Our technical team are tax qualified and highly experienced across the range of industries and sectors that are likely to be eligible for R&D claims and we are experts in identifying what constitutes qualifying R&D innovation across the spectrum of businesses operating in the UK economy.
2. We prepare and submit high quality R&D claims day in day out – specifically we draft a detailed report which accompanies the claim and which relates each of your project activities and expenditures to the relevant clauses within the R&D tax legislation.
3. Our dedicated tax team diligently stay on top of the latest changes in R&D tax legislation (along with HMRC’s interpretation of it) ensuring your claims are always ahead of the curve.
4. Our team has a strong and proactive relationship with those at HMRC who are responsible for approving your claim thereby significantly reducing the likelihood of HMRC raising queries in respect of the claim.
5. We know exactly what information HMRC wants to see in the claim and how they prefer the claim to be structured thereby maximising both the accuracy and value of your claim.
6. We minimise the demands on your time by completing all of the paperwork on your behalf.
Yes – we already work with many accountancy firms to assist their clients with R&D claims. We will liaise with your accountant and advise them on what boxes need to be completed on your company’s tax return (CT600) and also provide them with your R&D tax report which should be submitted along with the tax return.rn.
Fees, Grants & Subsidies
We charge simple fixed fees which are easy to understand and agreed at the outset.
The fee is calculated as 5% of your qualifying R&D expenditure.
PLUS – we don’t charge any upfront fees. You only pay us when you receive a payment/tax benefit from HMRC.
DOUBLE PLUS – if your claim is unsuccessful you don’t pay us a penny! It really is a 100% no win no fee service.
If you have received a grant or subsidy then part or all of the expenditure incurred on the R&D activities may only be eligible for relief at the Large Company rate rather than the SME rate.
Generally speaking, if you have received a grant or subsidy which is classified as “Notifiable State Aid” (the organisation providing the grant/subsidy will be able to tell you if this is the case) then all of the expenditure you incur on R&D activities will only be eligible for relief at the Large Company rate (this is the case even if your company would otherwise qualify as an SME).
If an SME receives a grant or subsidy that is not “Notifiable State Aid” then the element of expenditure which is funded by the grant/subsidy will receive R&D relief at the Large Company rate with the non subsidised expenditure qualifying for relief at the SME rate.
The rate of relief available to a Large Company does not change if it receives a grant or subsidy.