Research and Development credits (R&D Tax Credits) are a powerful incentive for UK companies investing in innovation. However, navigating the complexities of these claims can be challenging. At PGR Advisory, our unique blend of engineering expertise and chartered accountancy ensures that your R&D tax credit claims are both technically sound and financially robust.
Understanding Research and Development Credits
Research and Development credits are designed to reward companies that are pushing the boundaries of science and technology. Whether you’re developing new products, processes, or services or enhancing existing ones, you may be eligible for tax relief.
As of April 2024, HMRC has introduced a merged scheme that combines the previous SME and RDEC schemes. Under this new scheme, companies can claim a 20% above the line credit on qualifying R&D expenditure, which is taxable and can be used to discharge corporation tax liabilities, or if there is no tax due, it may be repaid.
Who Can Claim R&D Tax Credits?
Any UK company subject to Corporation Tax and undertaking qualifying R&D activities can claim R&D tax credits. This includes businesses across various sectors, from manufacturing and software development to pharmaceuticals and engineering.
To be eligible, your project must aim to achieve an advance in science or technology and involve overcoming scientific or technological uncertainties. It’s important to note that the advance must benefit the field as a whole, not just your company .
What Qualifies as R&D?
HMRC defines R&D as work that seeks to achieve an advance in science or technology through the resolution of scientific or technological uncertainties. Uncertainties that could be readily overcome by a competent professional are not scientific or technological uncertainties.
The advance in science or technology may have a tangible outcome, eg a new product or process or more intangible outcomes, eg new knowledge or cost improvements.
It’s crucial to document how your project meets these criteria, as HMRC requires detailed explanations of the uncertainties faced and how they were addressed.
Preparing for a Successful Claim
The following steps will help to ensure your R&D tax credit claim is compliant, as well as helping to maximise it:
Submit an Advanced Notification Form: If you’re claiming for the first time or it’s been more than 3 years since your last claim, you must submit an advanced notification form to HMRC within 6 months of the end of the accounting period.
Identify Qualifying Projects: Assess your projects undertaken to determine which ones meet HMRC’s R&D criteria.
Maintain Detailed Records: Keep comprehensive documentation of project activities, including technical challenges, solutions implemented, and time spent by staff.
Calculate Eligible Expenditures: Identify and quantify costs directly incurred on R&D activities, such as staffing, materials, and software.
Provide Additional Information: From August 2023, all companies must submit an additional information form detailing the R&D activities and qualifying expenditure to support their claim .
How PGR Advisory Can Help
At PGR Advisory, we specialise in guiding companies through the intricacies of R&D tax credit claims. Our team offers:
Technical Expertise: Our engineers understand the complexities of R&D projects and can accurately identify qualifying activities.
Financial Acumen: Our chartered accountants, ensure that your claims are financially sound and comply with HMRC requirements.
Comprehensive Support: From initial assessment to claim submission, we provide end-to-end assistance, including preparing the necessary documentation and liaising with HMRC on your behalf.
Risk Mitigation: With increased compliance activity from HMRC any claim can be selected for enquiry. We prepare a robust technical report which aims to answer any queries HMRC may have, making the enquiry process less painful. We can help you navigate the increased scrutiny from HMRC, reducing the risk of claim rejection.
Stay Ahead with Expert Tax Advice
With the ever evolving Research and Development credits tax relief legislation combined with the increased compliance requirements, it’s more important than ever to have expert guidance. PGR Advisory combines technical insight with financial expertise to help you maximise your R&D tax credit claims while ensuring compliance with HMRC regulations.
Beyond R&D Credits: Additional Support for Innovators
In addition to assisting with research and development credits, PGR Advisory offers a range of services to support UK companies investing in innovation. We provide expert guidance on the Patent Box regime, which allows businesses to apply a reduced rate of Corporation Tax to profits earned from patented inventions. Our team also advises on securing grant funding from UK and regional innovation bodies, helping you access the financial resources needed to scale and commercialise your R&D efforts. By integrating these services with your R&D strategy, we help you unlock even greater value from your innovation investment.
Contact us today to discover how we can support your innovation journey.