FAQs
Frequently Asked Questions
See below our most frequently asked questions.
Which Scheme Can I Claim Under?
The small and medium sized enterprises, SME, scheme is available for companies who have less than 500 staff and a turnover of under €100 million or a balance sheet total under €86 million. The figures for connected or partner companies may need to be included.
The research and development expenditure credit, RDEC, scheme is available for companies who exceed the size thresholds for the SME scheme. It can also be used by SME companies who have received subsidies or who have been subcontracted to carry out R&D work by a large company.
How much do you charge?
Our fees are based on the tax benefits that we successfully achieve. Our fee is only due once the claim has been processed by HMRC, so there is no risk to you.
The research and development expenditure credit, RDEC, scheme is available for companies who exceed the size thresholds for the SME scheme. It can also be used by SME companies who have received subsidies or who have been subcontracted to carry out R&D work by a large company.
What happens if HMRC enquire into the R&D claim?
HMRC can open an enquiry into any return, they can be selected at random. We understand how stressful this can be so will deal directly with HMRC to bring the enquiry to an end as efficiently as possible. Our technical R&D reports are designed to answer any questions HMRC may have about your R&D activities. This should allow the enquiry to be concluded promptly.
The research and development expenditure credit, RDEC, scheme is available for companies who exceed the size thresholds for the SME scheme. It can also be used by SME companies who have received subsidies or who have been subcontracted to carry out R&D work by a large company.
Will this take a lot of my time?
We appreciate your time is valuable and don’t want you to have to waste it filling in spreadsheets and writing up project descriptions. Our technical experts will discuss your activities with you and write up the projects. This ensures the descriptions detail how the activity qualifies as R&D.
The research and development expenditure credit, RDEC, scheme is available for companies who exceed the size thresholds for the SME scheme. It can also be used by SME companies who have received subsidies or who have been subcontracted to carry out R&D work by a large company.
I already have an accountant, can they complete my R&D claim?
R&D tax relief is a niche area, and is our team’s sole focus. Our sector specialists understand the technical aspects of your projects, allowing them to write a detailed R&D technical report. This will ensure your claim is maximised, whilst at the same time complying with the relevant legislation.
Our team also includes chartered tax advisors and chartered accountants, allowing us to file the CT600 to include the R&D claim. PGR Advisory are regulated by the Chartered Accountants Institute, giving you peace of mind.
We will keep your accountant informed throughout the claim process, and provide copies of the tax return and computation that we file with HMRC.
The research and development expenditure credit, RDEC, scheme is available for companies who exceed the size thresholds for the SME scheme. It can also be used by SME companies who have received subsidies or who have been subcontracted to carry out R&D work by a large company.
I Have received grants, can I still make a claim?
Yes, it is possible to claim grants as well as R&D tax relief. Depending on the type of the grant some expenditure may not qualify for the SME scheme, however a claim under the RDEC scheme may then be possible.
The research and development expenditure credit, RDEC, scheme is available for companies who exceed the size thresholds for the SME scheme. It can also be used by SME companies who have received subsidies or who have been subcontracted to carry out R&D work by a large company.
What costs can I claim?
There are six categories of qualifying costs:
- Staffing costs- a portion of costs for staff working directly on R&D can be claimed. Allowable costs are wages, employer’s National Insurance Contributions and employer pension contributions. Certain reimbursed expenses may also qualify. Dividends are not qualifying costs.
- Consumables – any items consumed or transformed during the R&D process. This includes water, fuel and power.
- Externally provided workers – temporary workers provided by an external staffing company.
- Sub-contractors – under the SME scheme 65% of the payments to an unconnected sub-contractor may be claimed. For payments to connected sub-contactors, or companies claiming under the RDEC scheme the rules are more restrictive.
- Software – this must be used in the qualifying activity, where only partly used for R&D a portion of the cost may be claimed.
- Clinical trials volunteers – for projects in the pharmaceutical industry only.
The research and development expenditure credit, RDEC, scheme is available for companies who exceed the size thresholds for the SME scheme. It can also be used by SME companies who have received subsidies or who have been subcontracted to carry out R&D work by a large company.
How do I record my R&D expenditure?
HMRC do not insist on a specific form in which records must be kept. However the records must be sufficient to quantify the claim. Invoices for qualifying expenditure and payroll records should be retained.
The research and development expenditure credit, RDEC, scheme is available for companies who exceed the size thresholds for the SME scheme. It can also be used by SME companies who have received subsidies or who have been subcontracted to carry out R&D work by a large company.
Can I claim if my company is loss making?
Yes, R&D tax reliefs are available regardless of profitability. For companies claiming under the SME scheme a claim will increase the loss. The loss can be carried back, carried forward or surrendered for a payable credit. For loss making companies claiming under the RDEC scheme the net RDEC will be repayable.
The research and development expenditure credit, RDEC, scheme is available for companies who exceed the size thresholds for the SME scheme. It can also be used by SME companies who have received subsidies or who have been subcontracted to carry out R&D work by a large company.
We carry out R&D as a sub-contractor, does this qualify?
A claim cannot be made under the SME scheme for R&D activities carried on as a sub-contractor. However, a claim may be made under the RDEC scheme if the work is contracted to the SME by a large company.
The research and development expenditure credit, RDEC, scheme is available for companies who exceed the size thresholds for the SME scheme. It can also be used by SME companies who have received subsidies or who have been subcontracted to carry out R&D work by a large company.
I Have no employees, can I still make a claim?
Yes a claim can still be made, provided you have incurred other qualifying costs. For accounting periods commencing on, or after 1 April 2021 the amount of payable credit you can claim will be capped. The cap is £20,000 plus 300% of the relevant expenditure on workers. If you have no employees the amount of credit you can claim would be affected. Any loss that cannot be surrendered for a payable credit will carry forward in the usual way.
The research and development expenditure credit, RDEC, scheme is available for companies who exceed the size thresholds for the SME scheme. It can also be used by SME companies who have received subsidies or who have been subcontracted to carry out R&D work by a large company.
Can I claim for software development?
Software development may qualify in one of two ways:
- Where software is developed solely for use in a larger R&D project, then the software will qualify as part of that project
- Development of software as the goal of the R&D project
The project must meet the general R&D conditions, the aim of the project must be to seek an advance in science or technology.
Can I claim for assets purchased for use in R&D?
Expenditure on capital assets such as plant and machinery or buildings does not qualify for R&D tax relief. They may qualify for R&D capital allowances at 100%.
Do my staff need to complete timesheets?
The completion of timesheets is not a mandatory requirement. For those companies that already complete timesheets they can provide evidence of the time employees spent on R&D activities, however they are not appropriate for every company. Staff allocations should be reasonable and supported by some evidence.
Are there any limits on the amount of expenditure that can be claimed?
There are no minimum or maximum limits on the amount of expenditure that can be claimed.
Our competitors have launched a similar product to ours, can we claim?
Yes, if an advance in science or technology has already been made, but details are not readily available then work to achieve such an advance may still qualify. The original advance may be a trade secret so no information would be available. Any routine copying or adaption would not be a qualifying activity for R&D.
Can I claim for improvements to an existing product?
If you are seeking to make an appreciable improvement to a product this may be R&D. The improvement must be more than a routine upgrade.
Can I claim for failed projects?
Yes, so long as at the beginning of the project the aim was to seek an advance in science or technology. A failed project can demonstrate that there were significant uncertainties.
Who can claim?
In order to claim R&D tax relief the following conditions apply:
- The company must be subject to corporation tax
- The company must be a going concern
- Qualifying expenditure must be incurred
- Qualifying activities must be undertaken for the company’s trade or intended trade.
How long will it take to receive my payable credit?
HMRC aim to process SME payable credit claims within 28 working days. Where the R&D claim results in a refund due of corporation tax already paid this should take less time.
RDEC claims generally take longer to process.
How much relief will I get?
For a SME company the relief is given by way of an additional 130% deduction for qualifying costs. This 130% is in addition to the normal 100%, giving a total deduction of 230% for qualifying costs. If the company is loss making a cash credit, at 14.5% of the surrenderable loss may be claimed.
For companies under claiming under the RDEC scheme a tax credit of 13% of the qualifying expenditure can be claimed.
How do i claim?
Claims must be made on a corporation tax return, CT600. A tax computation must also be submitted with the CT600. Although not required, HMRC encourage companies to submit information detailing how their projects qualify for R&D tax relief and a breakdown of costs by project.
At PGR Advisory we submit a detailed technical report with the CT600. The report will detail each project carried out by the company, how it qualifies for R&D tax relief and a breakdown of the associated cos
My R&D costs have been capitalised, do they still qualify?
For expenditure to be qualifying it must be recognised as a deduction when calculating the taxable profit. Alternatively it can be included as an intangible asset in the accounts. For qualifying expenditure that has been recognised as an intangible asset no relief for the associated amortisation would be due.
What type of projects qualify?
To qualify for R&D relief a project must aim to make an advance in science or technology. However, advances in social science or a theoretical field do not qualify. The project must have uncertainties that cannot be easily overcome by a competent professional.
I already have an accountant, does utilising PGR affect them?
In short no, as a registered accountancy practice with Chartered Tax Advisors, PGR can carry out all aspects of the claim including filing with HMRC.
Our Sector Specialists, coupled with our Chartered Accountants and Chartered Tax Advisors carry out the full claim process; from project identification to technical report writing, computation and CT Return amendment.
Throughout the process we will ensure that your accountant or auditor has copies of everything we file with HRMC on your behalf.
By generating good working relationships with incumbent accountants, many practices now utilise our specialist tax services in niche areas such as R&D tax credits on a regular basis for their clients.
What costs qualify for R&D tax credits?
R&D tax credits can be claimed on revenue expenditure carried out in the course of the R&D project, below are the allowable cost categories:
- Staffing costs
- Subcontracted R&D
- Externally Provided Workers (EPWs)
- Consumables
- Software
- Payments to the subjects of clinical trials.
Staff Costs
The rules are the same for both SME and RDEC claims, with the following items contributing to the total staff cost:
- Gross salary
- Employer national insurance contributions
- Pension contributions made by the employer
- Some categories of expense that the employee claimed back in the course of their work
Note that dividends received by Directors are not an allowable staff cost.
Subcontracted R&D
For SMEs, payments to unconnected Subcontractors in relation to R&D are allowable, albeit HMRC restrict the amount which can be claimed to 65% of the original cost.
Fore RDEC claims, the rules around subcontracted expenditure are much more restrictive.
Please get in touch to request additional information regarding “connected” subcontractors and the rules around RDEC claims
Externally Provided Workers (EPW)
EPWs are when the company receives staff from a staff provider such as an agency. The EPW cost can be included if the worker is carrying out R&D however, the cost must be restricted to 65% for non-connected staff providers.
Consumables
For a material cost to be included in the claim, then the material must be consumed up in the R&D process in order to overcome the technical uncertainty.
This category includes water, fuel and power.
Software
Revenue expenditure on software can be included in the tax credit claim.
What makes a Company eligible for R&D tax credits?
To be eligible to claim R&D tax credits then you must be:
- UK registered Company subject to UK Corporation Tax
- Be carrying out qualifying R&D activities
- Be a going concern
- Not be in administration or liquidation
- Have incurred costs when carrying out the qualifying activities
Qualifying activities vary widely company by company, to discuss your activities please get in touch to have a no obligation chat with one of our sector specialists
What is the definition of an SME for tax purposes?
An to qualify as an SME for R&D tax credits, the company must not exceed more than 2 out of the 3 thresholds noted below:
- Staff headcount of 500 (excluding students, parental leave & apprenticeships);
- Turnover of €100m (excluding VAT);
- Gross assets of €86m (Total fixed assets + total current assets)
The thresholds are set in Euro as the SME definition is set by the European Commission (Simply convert the Company figures at the prevailing exchange rate)
Partner and linked enterprises can impact these thresholds, if you have a more complex group structure please contact our team to discuss further.
How is an R&D Tax Credit claim treated in Company statutory accounts?
For the SME tax credit scheme:
The credit received is non-taxable and shown in the tax line of your accounts.
If the R&D tax credit claim is finalised in advance of your accounts being completed, then the corporation tax figure can be adjusted accordingly to show the reduction in tax or credit receivable.
If the tax credit claim is completed post your accounts being completed, the tax credit can be reflected as a prior period adjustment or through the tax note in your current period accounts.
The PGR team can provide your bookkeeper with the required accounting journals.
For the RDEC scheme:
The credit received is treated as taxable income, with the gross credit being shown above the line in the P&L.
There are several accounting treatments available. Our team includes a Registered Auditor, allowing us to provide you with all the potential options and their impact on your accounts.
In both instances it is not a requirement for prior period accounts to be amended when a tax credit is received in relation to a prior period.