R&D FAQs

R&D tax credits is an incentive where UK limited companies can receive a reduction or rebate on their CT for funds spent on eligible R&D activities. This incentive was established by the government in 2000 and has continued to support businesses of all sizes and sectors to grow.

No, you do not need to create a new product to qualify for R&D tax credits. For instance, you can make significant advancement or appreciable improvement to existing machinery, in a manner that promotes efficiencies within your sector.

Yes, you can claim for unsuccessful projects if you can demonstrate that an advancement was sought, and you attempted to overcome the ‘uncertainties’ you faced during your research and development endeavours.

Knowing which projects actually qualify for R&D tax relief and what expenses can be claimed, are important areas of consideration, particularly because they have the power to maximise the value of a claim.

Here are things that you CAN claim for:

• Utilities (Gas, Electricity, Water).
• Salaries and Wages.
• Employer’s NI Contributions.
• Employer’s Pension Contributions.
• Materials and wastage consumed during the project.
• Prototypes created.
• Subcontractors’ invoices.
• Software Licenses.

R&D tax credits are available to all companies regardless of sector or size. There are two incentives which cater to different sized businesses. The SME’s (SME tax Credit scheme) & Large companies (RDEC).

The scheme you will be eligible for is determined by 3 factors. For SME’s, your company would be eligible:

• If your company has less than 500 staff
• and less than 86 million euros in assets
• or less than 100 million euros in turnover

If you exceed the above, then you must claim via the Research and Development Expenditure Credit (RDEC) scheme.

The SME and RDEC incentives operate in significantly different ways, so it is important that the correct process is selected during the filing of a claim.

The first step will be to ensure that your projects and activities qualify for the incentive.

The second step will be to produce evidence in the form of project technical reports, pictorial evidence, and calculations to support your claim. This is an incredibly sensitive and fragile process, as mistakes could run the risk of HMRC opening an enquiry into the claim and asking for additional information.

Alternatively, you have the option of contacting specialists such as RDS who will not only produce all the documentation requirements. Rather, we will work with you through the entirety of the claim process to ensure that your company remains compliant with HMRC’s requirements.

Once we have compiled all the necessary documentation and it has been reviewed by yourself, it is uploaded and submitted with your corporation tax return. Once HMRC receive this information, it is sent to a specialist incentives unit where it is treated accordingly.

Typically, reductions in Tax Liability are often processed immediately and will reflect within 24-48 hours. However, in circumstances of tax repayment or payable credits, it can take up to 4-8 weeks.

There are a number of options you can receive your benefit from HMRC. This is typically dictated by your companies’ tax position, as well as preferences.

Claims submitted in previous years: these usually tend to be a rebate (if the liability has already been paid).

Claims submitted in current years: The typical option is a reduction in corporation tax liability (if the company is profit making). In circumstances where the company may be loss making, they may elect to carry the losses back (to offset against previous outstanding tax liability) or carry the losses forward (to utilise against future tax liabilities).

Depending on the tax position, and the direction it anticipates for the future, a company may also elect to surrender their losses for a payable credit to aid with cash flow.

The R&D incentive is aimed at UK companies that pay corporation tax. Since charities, universities and sole traders do not pay corporation tax, they are unable to claim R&D Tax Credits.

Yes! The claim looks at the costs incurred within your financial year. Some projects can last several years therefore, you would submit a claim each year and detail the developments that fall within the relevant claim period.

Yes. As long as you attempted to solve a scientific or technological uncertainty and incurred costs, you can claim.

Yes. The incentive is for UK based limited companies but if part of your R&D is carried out overseas via sub-contractors or even part of a larger network of offices, you can still claim.

We would always advise speaking with experts such as RDS, in order to ensure that elements such as accounting structures, do indeed render your projects as qualifying.

In some scenarios you can use a combination of the above to maximise the tax relief calculated or increase the amount of cash you receive to help with cash flow.

If you are hiring a 3rd party to assist with your project then you can generally claim for 65% of the payments made to unconnected parties.

If you are connected to the 3rd party then the rules become more complex, and we would advise seeking advice from a professional firm like ourselves.

We bill you on the benefit identified and operate purely on a ‘success’ percentage, (this means we only bill you if your claim is successful).

We do not charge day rates, nor do we have hidden fees; we simply create your R&D claim and supply your accountant with the claim details when it is ready for submission to HMRC.

Following the successful receipt of your benefit, we charge a Success Fee of 25% when your first and second claim has been approved and a flat rate of 20% for future years.

Our billing structure is developed with our clients in mind; by billing you only after you have received your benefit from HMRC we remove the risk of upfront costs from your business.

We also provide an amazing referral scheme, where we pay you a commission that you can utilise to offset against your bill.

For many firms, the prospect of R&D can seem daunting and extremely complex at first, this is why BSE aim to make the process as simple and straightforward from the onset.

Step 1: A 10-minute conversation with the Business Development Team, to discuss eligibility.

Step 2: Signing of the NDA/ client agreement, dictating the terms and conditions of our service.

Step 3: Arranging and undertaking a Project Technical Report call with your dedicated financial analyst. This will entail evidencing your developmental endeavours and apportioning financial calculations to support your application with HMRC.

Step 4: Reviewing compiled information to ensure you are completely satisfied with the information collated prior to its submission to HMRC.

Step 5: BSE will complete the additional information via the HMRC portal and actively monitor the status of the application to ensure that any benefit is realised within the anticipated timeframe.

HMRC aim to process payable credit claims within 28 days of receiving them. However, processing time can be affected by aspects such as, time of the year. There is a general increase in demand for months like March and December.

As a patent is issued on the completion of R&D, it would not be considered an allowable cost in accordance with the remits set for the R&D tax Credit incentive. However, companies can utilise a separate incentive known as Patent Box which permits companies to apply a 10% Corporation Tax to profits associated with the patented invention.

Generally, there is no additional requirement for record keeping specifically for the purposes of claiming R&D relief. However, it is important to give a summary of R&D projects undertaken and an explanation of how the project(s) qualify. This process is undertaken during your Project Technical Report call with your dedicated BSE financial analyst.

No, we do not bill you until you receive your benefit from HMRC. The relationship we build with our clients is based on the principles of trust and transparency. Therefore, the benefit is paid directly to you before you pay us for the services rendered.

Our dedicated team of analyst ensure that each project is thoroughly vetted before proceeding to the next stage of claim processing. In an instance where a project is deemed ineligible, we typically undertake thorough investigation to help our clients identify if there is potential for future project eligibility.

We would never dismiss the fact that R&D can arise at any point due to factors such as market trends, legislative changes, an identified gap in the market etc. In fact, we have an open-door policy with our clients, wherein if there is no identified eligible project, they are free to contact us at any point for advise into their developmental endeavours.

In instances where there is no prospect of eligible R&D activity, we believe in upholding the long-lasting partnership we have with our clients and will recommend partnering with us on our referral program.

Every successful application will result in us sharing our fee with our clients as a referral partner.

An enquiry from HMRC usually occurs when HMRC have information they wish to clarify about the nature of a claim. Due to recent legislative changes, HMRC’s approach to R&D tax credits is likely to become stringent. It is therefore important, to have an experienced, competent, and trusted partner, like RDS to guide you through the claim process.

We act purely as a standalone R&D specialist, therefore in the unlikely event of a HMRC enquiry, we would manage the process in its entirety (as part of our service agreement with our clients).