Calculating your R&D tax credit claim
Medical, scientific and technological research is a vitally important part of our society – often a lifesaving part. It’s also often risky, expensive and initially unrewarding, as you throw pounds after pounds in a seemingly never-ending quest to make something work.
That’s why the UK’s research and development tax credit scheme, under which companies can claim back some of their research costs from the government, is so important. But are you likely to get back an amount of money that will make a difference?
The answer, for many companies, is an enormous yes. Claims often amount to tens or hundreds of thousands of pounds. Here are some of the things you can claim for:
Staff costs: For staff who are directly working on research and development, you can claim a proportion of their salaries, national insurance contributions, pension contributions and expenses. This includes supervisors, managers and support staff if they are doing work specifically for the project.
Agency workers: You can claim up to 65% of the money paid to recruitment agencies for staff hired to work on research and development.
Subcontractors: The rules here are different depending on whether your company is classed as small or large. A small company has fewer than 500 staff and either a turnover of less than €100m or a balance sheet total of less than €86m. Assuming the company you have subcontracted to isn’t connected to yours, small companies can usually claim back up to 65% of subcontracted costs.
A large company is anything bigger than this. Large companies can only claim for subcontracted costs if they’ve employed a charity, higher education institute, scientific research organisation, health service body, or individual or partnership of individuals (so not a corporation) to do the work.
Materials and utilities: You can claim for materials you’ve used up in your research, as well as a proportion of your water, gas and electricity bills.
Software: You can claim for all or part of the cost of software you’ve bought specifically for your research and development.
Clinical trials: You can claim some of the cost of paying trial volunteers.
Prototypes: You can claim some of the design, construction and testing costs for prototypes. If you sell the prototype, this will reduce the amount you can claim.
You can’t claim for:
- the production and distribution of goods and services.
- capital spending (though there is a separate research and development allowance to help you with the cost of plant, machinery and buildings)
- the cost of land
- the cost of trademarks and patents
- rates or rent
- employment-related benefits
Can I claim if I have made a loss?
Loss-making businesses are as entitled to make a claim as profit-making ones. Profitable small companies will get on average 25% of their costs back, while loss-making small companies can recoup up to a third. Large companies, both profit and loss-making, can get up to 9.7% of their costs back.
Have a look at this r&d tax credit calculator to see how much you could be eligible for.