Easy chart showing how much your R&D claims could be worth in cashback

chart showing how much your R&D claims could be worth how much your R&D claims could be worth in cashback how much your R&D claims could be worth UK Government?s Research and Development schemes Research and Development tax credit Research and Development Linda Eziquiel

There is still quite a lot of confusion around how much research and development cashback you can get, so I’ve put together a simple read-off chart to give you an idea of what your R&D claims could be worth.

Introduction: What do you need to know?

Here is a quick recap to set the scene in case this is new to you or you need to get your facts straight. 

The UK Government’s Research and Development (R&D) cashback schemes apply to UK registered limited companies. Claims are made as part of your annual corporation tax returns and that’s the beauty of it, because that makes for a very streamlined claims process. You can claim year on year for every year where you are undertaking qualifying developments.

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But be warned - you only have two years from the end of each accounting year to claim your cashback. So if you didn’t do it as part of your annual corporation tax return, you can ask your accountant to amend your tax return to include a R&D claim so long as you are still within the two year window. This is a rigid deadline so don’t miss it if you don’t want to lose out.

The average benefit is around £65,000 for Small and Medium Enterprises (SMEs). SMEs are defined as companies with zero to 499 employees (i.e. under 500 employees) plus you need to meet at least one of the following: under 100 Million Euros turnover or under 86 Million euros on your balance sheet, in the relevant accounting year.  

What is the claims process?

The first step is to identify your qualifying activities (read more here on what counts as qualifying activities) and then cost them to work out Your Costs for the accounting year.  

The main costs you can count to work out Your Costs are:

  1. The relevant portion of employee wages for time spent on qualifying activities (e.g. if Gill’s annual wage is £30K and Gill worked half of her time on qualifying R&D activities you can count £15K of Gill’s wage as part of Your Costs) – employee costs can be counted at 100% of the relevant portion of your wages bill for time spent on research and development activities.
  2. Third party contractor costs where contractors were directly working on your R&D projects (freelancers, digital agencies, contractors working on developing prototypes or helping with other development activities, agency staff where the agency pays the worker and you pay the agency, engineers, testing facilities etc. etc. based in the UK or abroad) – third party contractor costs can be counted at 65% of the costs invoiced to your company for direct R&D activities (excluding VAT).
  3. The relevant portion of consumable used up as part of your research and development activities (e.g. gas, electricity, materials used in prototypes that cannot be sold, wasted materials) – consumables can be counted at 100% of the amount you paid to purchase the consumables used up for your research and development activities (excluding VAT).

What can you get back?

What you can get as cashback (in the form of extra tax relief or a tax credit cash payment) depends on two factors:

  1. Your Costs – the total qualifying costs you can identify (as outlined above).
  2. Your Taxable Profit or Loss in the relevant accounting year.

Because the value of the cashback you can get partly depends on your Taxable Profit or Loss, our chart shows you the range from the Minimum to the Maximum Cashback Values you can expect based on Your Costs.  

So sharpen your pencil and get out your calculator to work out Your Costs and then read off the value of cashback that you could get.

Of course this is just an estimation process,  you should consult a specialist before making an R&D claim.

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About the author

Linda Eziquiel

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Hi, I'm an R&D tax credit claims specialist, helping companies save thousands of pounds by reducing their corporation tax payments, or if they are loss making helping them get tax credit cash payments.

I'm proud to have:

  • Personally helped over 100 companies make successful R&D tax credit and relief claims.
  • With RandDTax (our company) - gained in excess of £75m for more than 920 companies since 2012.
  • Published an online course for accountants on Claiming R&D Tax Credits (see my publications).
  • Run dozens of CPD workshops for accountancy firms on Claiming R&D Tax Credits.
  • A 100% success rate across all my clients' R&D claims - covering a very wide range of industries.

  Find me at: http://www.cobizfunding.co.uk


Linda Eziquiel
Linda Eziquiel
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