R&D Tax Relief specialists
Are you missing out on tax relief?
(Research & Development) R&D tax relief is a government-backed corporation tax incentive, aimed at stimulating innovation and development in UK industries. Investing in innovation is good not only for every business, but also for the UK economy as a whole.
R&D tax relief is perhaps one of the least understood reliefs, both amongst the companies that might have a claim and also amongst the advisers who might help them make one. At Carpenter Box, our Tax Services Group is well equipped to be able to look at what might qualify as R&D spend and then guide you through the process of claiming R&D tax credits.
Qualifying Research & Development activities
To qualify, a company must be carrying out research and development work in the field of science or technology. The net benefit of R&D tax relief ranges from 9% to 33% of eligible expenditure, depending on the size of the company and whether a profit or loss has been made.
What actually constitutes R&D is wide ranging but includes the development of improvement of a product or process; there must be a technological advancement and an attempt to resolve a technological uncertainty.
We have found that many companies are carrying out qualifying R&D as part of their existing commercial product development. The best way to find out if you qualify is to speak to our team.
Research and Development Frequently Asked Questions
1. What is R&D tax relief (also known as R&D tax credit)?
R&D (Research and Development) tax relief is a UK government incentive designed to encourage companies to invest in innovation. It allows eligible businesses to reduce their Corporation Tax bill or in some circumstances claim a cash refund for qualifying R&D activities, even if the project was unsuccessful.
An R&D tax credit refers to the financial benefit a company can receive through the R&D tax relief scheme. For loss-making businesses, this often means a cash payment from HMRC, rather than a reduction in tax payable. The terms ‘R&D tax credit’ and ‘R&D tax relief’ are often used interchangeably.
2. How do I claim R&D tax relief?
To claim R&D tax relief, your company must:
- Identify qualifying R&D projects and costs
- Notify HMRC of your intention to make a claim within 6 months of the end of the relevant accounting period
- Prepare a technical narrative outlining the innovation
- Calculate the relief based on eligible expenditure
- File an Additional Information Form (AIF) with HMRC
- Submit the claim via your Company Tax Return (CT600) to HMRC
Working with a team of experienced tax advisers ensures the claim is accurate and maximises your benefit.
3. How is R&D tax relief calculated?
The calculation depends on your company type:
- SMEs and Large companies claim under the RDEC scheme which allows for a 20% credit of their qualifying spend
- SMEs which are qualifying ‘R&D intensive’ can claim up to 186% of qualifying costs, with potential cash credits for loss-making firms
Qualifying costs typically include salaries, software, subcontractors, and materials used in development.
4. What qualifies for R&D relief?
HMRC defines R&D as projects that seek to make an advance in science or technology, where the outcome was uncertain. Common qualifying activities include:
- Developing new products, processes, or services
- Improving existing technology
- Overcoming scientific or technical challenges
Eligibility is based on innovation, not just sector or size.
5. How do I submit an R&D claim to HMRC?
You submit your Additional Information Form (AIF) first, followed the R&D claim through your Company Tax Return (CT600). Alongside the financial figures, it’s best practice to include a technical report and a breakdown of qualifying costs.
6. Who can claim R&D tax credits?
Any UK limited company that is subject to Corporation Tax and undertakes qualifying R&D activities may be eligible, regardless of sector. This includes companies in software development, manufacturing, engineering, biotech, and more.
7. Can I claim R&D tax credits for failed projects?
Yes. R&D relief is available even if the project didn’t succeed, as long as it aimed to overcome technological or scientific uncertainty.
8. How long does it take to receive an R&D tax credit?
HMRC typically processes claims within 8 to 10 weeks, although it may take longer during peak periods or if the claim is selected for enquiry.
9. What records do I need for an R&D claim?
Maintaining good records of project plans, technical challenges, staff time, and costs will strengthen your claim and reduce risk during an HMRC enquiry.
10. Has the R&D tax scheme changed recently?
Yes. HMRC introduced several reforms, including changes to qualifying costs (like data and cloud computing), SME thresholds, and a new merger of SME and RDEC schemes from April 2024. It’s important to seek updated advice before submitting a claim. You can read more about the changes here.
How we can help:
- Ensuring you have considered all tax years where R&D tax claims can still be made
- Identifying all potentially qualifying R&D activities or projects
- Producing a detailed R&D claim on your behalf
- Submitting your claim and obtaining a repayment of corporation tax where appropriate
- Providing training to your staff to help identify R&D activities and projects in future years
To find out if you qualify for R&D tax relief, or for help with submitting your R&D claim, please get in touch with our tax specialists.