FAQs: R&D Tax Credits
To help businesses claim R&D Tax Credits, our team of specialists have compiled some of the most frequently asked questions related to the R&D Tax Relief scheme and the process of claiming.
General
What are R & D Tax Credits?
R&D Tax Credits are one of the largest tax reliefs available to UK companies, allowing them to reclaim up to 33.4% of all costs spent on research and development projects.
How long does it take to make an R&D Tax Credit claim?
Upon receiving the required documentation, Claim Capital will complete and submit your R&D Tax Credit Claim within 3-5 working days. HMRC typically takes between 4-6 weeks to process claims.
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Is it worth claiming research & development tax credits?
Claiming R&D Tax Credits provides a yearly cash injection, which can amount to as much as 33.4% of your R&D spending. Businesses that file R&D Tax Credits find that the financial return soon becomes an integral component of their growth. On top of that, we’ve made the claim process seamless. So yes – it’s worth it!
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Will claiming R&D Tax Relief dilute my equity?
No, claiming R&D Tax Credits will not dilute your equity (unlike other funding methods).
Are R & D Tax Credits taxable?
R&D Tax Credits under the SME scheme are non-taxable and will be shown on your income statement either as a corporation tax reduction or as a credit.
However, R and D Tax Credits claimed under the RDEC scheme are taxable income and will be shown as above-the-line income in your accounts.
When were R&D Tax Credits introduced?
Research and development tax credits were introduced for small and medium enterprises (SMEs) by the UK Government in 2000, as a way of encouraging innovation in the UK. A separate scheme for large companies was launched in 2002 called the Research and Development Expenditure Credit (RDEC) scheme.
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Why should I use a specialist to claim R & D Tax Credits?
Using a specialist to claim R and D Tax Credits not only saves you a substantial amount of time, but it also allows you to maximise the size of your R&D claim. Only experts can assess the complex nature of qualifying R&D expenditure and reclaim every penny possible from HMRC.
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What can I spend the repayment on once I receive my R&D tax relief?
Loss-making companies will typically receive their R&D tax relief in the form of a cash payment and this money can be spent on any business-related expense. We see clients utilise their R&D Tax Credits repayment on a variety of costs including staffing, marketing spend and further research and development.
R&D Tax Credits Eligibility
Am I eligible to apply for R&D Tax Credits?
To qualify for R&D Tax Credits your business must meet the following three requirements;
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Be a UK Limited or PLC company
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Have carried out qualifying Research & Development projects
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Have incurred eligible expenditure on these R&D projects
If your business meets all three of the above criteria then you are eligible to claim for R&D Tax Credits.
Can I make an R&D claim even if my company is loss-making?
Yes. Companies that are loss-making and have undertaken R&D projects can claim up to 33.4% of all eligible costs.
Do I need to be UK Limited company to apply for research and development tax credits?
Yes, you need to be registered as a UK Limited or PLC company to be eligible for R&D Tax Credits.
Is there a minimum amount of spend required to claim for R&D Tax Credits?
No, there is no minimum amount of qualifying research and development costs required to submit an R&D Tax Credit claim.
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Can my company claim R&D Tax Relief if the research and development project isn't finished?
Absolutely – businesses can claim R and D Tax Relief if the research and development project is unfinished. As long as you’ve spent money on R&D, you can file R&D Tax Credits!
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Can a company who is no longer trading claim research & development tax credits?
Only companies that are going concerned can claim R and D tax credits. Therefore, companies in administration or liquidation are not able to file an R&D Tax Credit claim.
Are universities eligible to claim research and development tax credits?
No, universities are not eligible to claim R&D Tax Credits. Universities are not able to claim R&D Tax Relief under the SME or RDEC scheme. According to HMRC this is to ensure that the R&D Tax Credits scheme remains effective and targeted to companies undertaking R&D.
What sectors are eligible to make an R & D claim?
Any company from any sector is eligible to apply for R&D Tax Credits, provided they are involved in research and development.
Can charities claim R&D Tax Credits?
Unfortunately, charities are not eligible to claim research and development tax credits.
There was a brief period between 2013 and 2015 when charities were eligible to claim R&D tax relief under the RDEC scheme, but HMRC has since updated their legislation.
Can I claim R&D Tax credits if I’m a sole trader?
Sole traders are not eligible to claim. Research and development tax credits can only be claimed by limited that are liable to UK corporation tax.
Can I claim R&D tax relief for an unsuccessful project?
Yes, provided the project meets the eligibility criteria, research and development tax credits can be claimed regardless of the project’s failure.
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How do I know whether my company qualifies for SME R&D Tax Credits?
UK businesses that qualify for SME R&D Tax Credit claims must have less than 500 employees, be turning over less than €100M, and have less than €86M in gross assets. This characterisation makes the SME R&D Tax Relief scheme more conventional than the RDEC R&D Tax Relief scheme.
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Can I claim research and development tax credits if I have already received a grant?
Yes, you can claim research & development tax credits if your business has already received a grant. Grant Funding and R&D Tax Credits can be used in conjunction with each other on the same research & development project. To find out more about how R&D Tax Relief can work in tandem with Grant Funding read our related blog - can R&D Tax Credits and Grant Funding work together?
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Can startups claim R&D Tax Credits?
Yes, startups can definitely claim R&D Tax Credits, provided they meet the scheme’s eligibility criteria. Research and development tax credits are often vital for early stage businesses, as the repayment from R&D Tax Relief allows them to reinvest into the growth of their startup.
Making an R&D Tax Credit Claim
How much R&D tax relief am I entitled to?
Profit-making companies are able to receive a tax benefit of up to 24.7% of costs spent on research and development, whereas loss-making companies are able to claim up to 33.4% of eligible costs.
What costs qualify for R&D Tax Credits?
Research and development tax credits allow you to claim for spend related to staff costs, subcontractors and consultants, as well as hardware, software or consumables.
How far back can you claim research and development tax credits?
In most instances companies can make research and development claims as far back as two financial years.
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However, there are circumstances which affects how far back you can claim R&D Tax Credits, this includes the shortening or lengthening your financial year.
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For a more detailed explanation on circumstances where the two-year R&D claim window is affected, read our blog how far back you can claim R&D Tax Credits.
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Can I reuse a previous R&D Tax Credit claim?
No, you cannot reuse a R&D Tax Credit claim. A single research and development project can span multiple years, however each R & D Tax Credit claim must demonstrate how the project qualified in that particular year, so the same R&D claim cannot be used twice. Reusing the exact same R&D Tax Credit claim over multiple years is likely to result in HMRC opening an enquiry.
How much time is involved in making an R&D Tax Credit claim?
If you choose to file research and development tax credits with a specialist such as Claim Capital, the time required from yourself is very little. Your R&D Tax Credit claim will be completed and submitted to HMRC within 3-5 working days.
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All we need is 1 hour of your time for a technical call, as well as access to the relevant financial information. Our team of experts then produce a comprehensive technical and financial report, detailing your R&D Tax Credit claim.
Can I claim R & D Tax Credits every year?
Yes, R and D Tax Credits can be claimed every year provided you have undertaken eligible research and development activities within that year’s accounting period.
How are R&D Tax Credits paid?
How you receive your R&D tax relief depends on which scheme you claim under. Under the SME scheme it also depends on your company’s financial position.
Loss making companies claiming under the SME scheme will receive their benefit as cash, paid directly into their bank account. Whereas profit-making companies under the SME scheme receive a reduction in their corporation tax liability.
For a more detailed explanation on how research and development tax credits are paid under the different schemes see our related blog.
How long does it take to receive R&D tax relief?
HMRC aim to pay out R&D tax credits within 28 days, however we typically see our clients receive their benefit from HMRC within 4-6 weeks.
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How can we ensure that we are maximising our R & D claim?
At Claim Capital, our experts have over 20 years’ experience submitting successful R&D Tax Credit claims, so we always ensure our clients are receiving their maximum tax benefit. However, there are a few additional ways that businesses can help maximise their R&D claim, read our blog how to maximise your R&D tax credit claim to find out more.
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What is an R&D Tax Credit enquiry by HMRC?
Every year thousands of companies submit R&D Tax Credit claims to HMRC, of these a small portion will lead to an enquiry. This means that HMRC will investigate the R&D claim in further detail and request more information. In the case of an enquiry HMRC will usually pause the processing of your R&D claim until you have provided sufficient information. At Claim Capital, if we complete your R&D Tax Credit claim and HMRC open an enquiry we will provide additional enquiry support at no extra cost.
Qualifying Costs for R&D Claims
Can I claim R&D tax relief on subcontractors?
Yes, costs for consultants and contractors anywhere in the world can be claimed.* Under the SME scheme you’ll be able to claim for 65% of the costs paid to any unconnected subcontractor working on eligible R&D projects.
*As of April 2024, you can only claim subcontractor costs from activity occurring within the UK.
Can VAT be included in an R&D tax credit claim?
VAT costs cannot be included in an R&D tax credit claim. The only exception is if VAT costs are not recoverable through a VAT return. This could be because your business hasn’t reached the current VAT revenue threshold of £90,000 or if your business is exempt from paying VAT.
Can travel expenses be included in my R & D tax credit claim?
In some cases, travel expenses such as flights and hotels, can be claimed as part of your R&D tax credit claim. However, for these costs to be included in the r & d claim employees must have paid for them as an out-of-pocket expense on their personal card and received reimbursement by the company.
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Which areas of R&D spending count as qualifying costs for R&D Tax Credit claims?
Research and development tax credits allow you to claim for spend related to staff costs, subcontractors and consultants, as well as hardware, software, pure mathematics, cloud computing, or consumables.
Claim Capital
Who are we and what do we do?
Claim Capital was founded on the belief that current R&D providers were overcharging and taking far too long to complete the claims. We’ve changed the R&D game to ensure our clients receive an efficient, cost-effective and flexible service to suit their business needs.
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Does Claim Capital complete R&D claims across every sector?
Yes, we claim research and development tax credits for companies in every sector. We have a team of R and D Tax Credit consultants who have specialist knowledge across a variety of sectors and are able to maximise your R&D Tax Credit Claim.
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Can Claim Capital submit my R&D Tax Credit claim?
Yes, at Claim Capital we can submit research and development tax credits on your behalf. We are in constant contact with HMRC to ensure your R & D claim adheres to all R&D tax relief guidelines.
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Why do you charge for R and D Tax Credits on a fixed fee basis?
At Claim Capital, we believe the R&D Tax Relief that companies receive should be reinvested into the growth of their business, not end up in the hands of their R&D advisor. R&D Tax Credit consultants who charge on a percentage basis are incentivised to inflate the value of their clients R&D claim so that they in turn receive a higher fee. This results in a high volume of fraud and a higher number of HMRC enquiries. For more information about why Claim Capital was founded on a fixed fee model visit our About page.
How quickly can Claim Capital complete R&D Tax Credits?
After receiving the necessary information, we aim to complete your R&D tax credit claim within 3-5 working days. Once your report is finalised, we will submit your claim to HMRC in-house, eliminating any delay that comes with accountants or third parties.
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What is your R&D claim process?
We want to make it as easy as possible for you to claim research and development tax credits! We operate a simple process which requires very little of your time. Initially we conduct a short call to ensure you are eligible for R and D Tax Credits, then you are assigned a dedicated Technical and Financial Consultant who completes the Financial and Technical report and finally we work with your accountant to submit the R&D Tax Credit claim or we submit the R & D claim on your behalf. For more information on how we submit an R&D claim visit our R&D Tax Credit service page
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How quickly can Claim Capital complete R&D Tax Credits?
After receiving the necessary information, we aim to complete your R&D tax credit claim within 3-5 working days. Once your report is finalised, we can submit your claim to HMRC in-house, eliminating any delay that comes with accountants or third parties.
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How much do you charge to complete an R&D Tax Credit claim?
We charge a fixed fee of £3,500 to complete an R&D tax credit claim where the relief due is £75,000 or less. For larger claims, reach out to our sales team for pricing.
Why our customers choose us:
Fixed-fee
We operate on a fixed-fee basis and we only get paid when your claim is successfully processed.
High quality service
End to end claim management and genuine, honest advice about your qualifying expenditure and likelihood of a successful claim. We focus on accurate, compliant claims – not inflating your claim.
Fast turnaround
We aim to submit claims within 3-5 working days of receiving the necessary information.