R&D Tax Credit Specialists & Advisers in London

R&D stands for Research and Development. It refers to the systematic and creative work undertaken by companies or organizations with the aim of developing new or improved products, processes, or services, or of improving existing ones.

The purpose of R&D is to find solutions to problems or to identify new opportunities by conducting scientific or technical research, experimentation, and innovation. R&D can involve a wide range of activities, such as basic research, applied research, experimental development, and design.

In general, R&D (Research and Development) refers to systematic and creative work undertaken by businesses or organizations with the aim of developing new or improved products, processes, or services, or of improving existing ones. To qualify as R&D, the work must meet certain criteria, such as:

1. Technological uncertainty: The work must involve an attempt to solve a technical problem, and there must be uncertainty about whether or how the problem can be solved using existing knowledge or technology.

2. Systematic investigation: The work must involve a systematic process of investigation, including planning, testing, and analyzing results.

3. Novelty: The work must result in new or improved products, processes, or services that are not simply routine or incremental improvements.

4. Technical content: The work must involve a significant amount of technical content, such as engineering, design, or scientific principles.

Examples of activities that may qualify as R&D include:

• Developing new products, such as pharmaceuticals or software

• Improving existing products, such as making them more efficient or eco-friendly

• Developing new manufacturing processes, such as automation or 3D printing

• Developing new software algorithms or systems

• Conducting scientific or engineering research to solve a technical problem

• Developing new materials, such as composites or coatings.

R&D relief must be claimed within 2 years of the accounting period the R&D took place. For example if your accounting year end is 31 December 2020 you have until 31 December 2022 to submit your claim. This means you are able to submit an amended tax return for a previous period if you may have missed out on potential tax credits or tax savings.

R&D tax credits work by enhancing your companies R&D expenditure by 130%. This enhancement can reduce your corporation tax bill. Or if you’re loss making – you can surrender your losses for a Payable Tax Credit. This will allow your company to recover between 25% and 33% of its R&D expenditure.

HMRC works to process applications for R&D Tax Credits within 28 days. However, the processing time required for HMRC to review and consider an R&D Tax Credit claim depends largely on the nature of the claim itself in addition to the complexity of a company’s structure and its accounting. Even the time of year can make a difference, with peak accounting times such as March and December being particularly busy and resulting in slower processing times. We advice to schedule a discovery call with our R&D tax experts before the rush.

Loss-making SMEs are welcome to claim R&D Tax Credits. Where the additional enhanced R&D deduction is more than the SME’s taxable profit for the relevant accounting period then this creates a loss for corporation tax purposes.

The SME can then decide to go down one of these three routes:

Carry the loss forward and offset against future profits;

Carry back the loss to the previous accounting period (if there was a taxable profit);

Surrender the loss (either partially or fully) to HMRC in return for a payable R&D tax credit.

The company can surrender the lower of the enhanced R&D relief or the taxable losses for the period.