Research and development is vital to the UK economy and its status as one of the world’s most exciting and innovative marketplaces. As such, there has been significant investment by companies of all sizes over recent years, while the UK government has taken measures to reward those businesses engaging in qualifying activity by providing tax credits and benefits. In fact, it’s estimated that R&D tax credits contribute up to £6.8 billion to the UK economy.
R&D tax credits are available for eligible companies of all sizes, with different schemes available depending on business size. For large companies – i.e. those businesses with turnover in excess of €100m and which employ more than 500 members of staff – the applicable scheme is known as the Research and Development Expenditure Credit, or RDEC for short. What’s more, making a successful claim under the RDEC scheme makes sense for businesses that may not currently be claiming, with the average claim worth just shy of £350,000.
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What is RDEC?
Making a claim through the RDEC scheme provides the opportunity to benefit from a tax credit worth 11% of your qualifying expenditure up to December 31, 2017, and 12% thereafter. This credit is taxable so, depending on whether your company is in profit or not, the credit may take the form of clearing the liability or as a cash payment.
The costs you can claim relate to any applicable R&D project undertaken by your business during the period for which you are claiming. Among the most common forms of expenses that can be claimed are those relating to staffing, such as salaries, Class 1 NICs, and pension fund contributions. It’s worth noting that you can also claim for selected work conducted by subcontractors, as well as consumable items such as materials and utilities used throughout the project.
How to qualify?
The qualifying criteria for the RDEC scheme has already been detailed, but what about the work that has been undertaken? In its simplest terms, qualifying R&D activity should be work that has looked for an advance in science and technology that had to – and did – overcome an uncertainty that could not be easily worked out by a professional in the field.
Of course, such terminology is somewhat vague, meaning making a claim isn’t as straightforward as you might think. It’s because of this that many organisations decide to seek R&D tax solutions from leading tax accountants. After all, making a successful claim – particularly one worth hundreds of thousands of pounds – is never going to be simple, so ensure that you work with professionals that can help you.
