Research and Development (“R&D”) Tax Credits are reliefs that were introduced to support innovative companies who are working on science and technology projects. R&D reliefs are typically claimed by companies that are seeking to advance in their particular field through research or development. The reliefs are utilised by a wide variety of different companies, below are five key facts you need to know about R&D Tax Credits:
- A professional in the same sector cannot easily work out the advancement – Within the application, it should demonstrate that a professional cannot easily conduct the advancement. A company would demonstrate this by showing previous failures in this advancement and experts demonstrating the difficulties and uncertainties involved. HMRC would consider advancement when a company seeks to advance its overall knowledge or capability in technology or science-related field.
- There are two main types of R&D Relief –
1. Small and Medium-Sized Enterprise R&D Relief: Aimed towards companies with less than 500 employees and a turnover of under 100 million euros (or a total balance sheet of under 86 million euros).
2. Research and Development Expenditure Credit: Large companies or SME’s who have been subcontracted by a large company can also avail of R&D relief allowing for a credit of 12% of qualifying R&D expenditure.
- A qualifying project must show how uncertainty was overcome – This requires showing how the relevant R&D needs testing and analysis to develop further. Uncertainty is when knowledge of whether something is feasible, possible or achievable is not readily available or easily determined by a competent professional in a similar field.
- The project must show advances in the relevant field – Advances in increasing knowledge or capability to help resolve any uncertainties must be demonstrated in the technology or science fields as a whole and not just the Company.
- Connected parties are included in a companies staff, turnover and balance sheet totals- A connected party would constitute as an individual or company that has over 50% voting rights in the Company. Regarding subcontracted R&D, there are special rules that are applicable to connected or elected to be connected parties, for more information.
The above demonstrates five key facts that a company should be aware of when thinking about R&D Tax Credits. However, there are other conditions that should be met, and research into the reliefs should be thoroughly untaken before the application is submitted, we would be pleased to assist.