If you’ve read earlier articles on this site – such as what is R&D and what costs can I claim – this is the point where we piece them all together. Now I’ll show you how to claim R&D tax credits. To make a claim, you’ll need to articulate to HMRC how your company, your project and the associated costs, qualify for the tax credit.
Worth noting that this article focuses on how to claim R&D Tax Credits – the scheme for small and medium sizes businesses. The process for RDEC – the scheme for companies with over 500 employees or turnover higher than €100m – differs slightly.
You’ll need to do two things when making a claim. Both of which are covered in detail below.
The aim of the report is to explain to HMRC how your project qualifies as R&D as per their definition. As well as how the costs you’ve incurred have been calculated, and to confirm they are all claimable. If you're not sure how to do that - check out these links: what is R&D and what costs can I claim.
The information you’ll need to include in your report is:
A few things to bear in mind when you're writing the report:
The corporation tax return form (CT600 - available here) is how you formally notify HMRC of your R&D claim. You will be required to include your enhanced expenditure – which is calculated as 230% of your claimable costs, as well as the refund in corporation tax, or payable tax credit you wish to take.
Normally – your accountant will make any amendments to your corporation tax return on your behalf. If you work with Zest – we can deal with your accountants directly about doing so. Your accountants will need to submit your R&D Tax Credit Report and corporation tax return at the same time.
So you've written your report, and submitted it with your corporation tax return. You now know how to claim R&D tax credits. What next? Well - now you wait.
HMRC aim to pay 95% of claims within 4 weeks, although refunds in corporation tax can and do take longer. If HMRC wants to open an enquiry, they aim to do this within 60 days. Enquiries – a word that casts dread on any business owners mind. However, the risk of an enquiry can be minimized - I cover this in my article: How to Avoid an R&D Tax Credit Enquiry and Still Get the Best Results.
Assuming you don't receive an enquiry letter - you should notice the money arriving in your nominated bank account, with interest applied where relevant. If it's been more than 8 weeks - call HMRC to follow up on your claim.
Well - to start with - I'm probably biased. But let me explain why I think the answer should be yes.
The aim of this article, and others on the knowledge bank, is to explain the R&D Tax Credit claim process as clearly as possible. But writing a claim isn't easy. In my experience, claims made by businesses or generalist accountants get less than half of the return they are due. That isn't to mention the extra risk of mistakes that could lead to enquiries or fines.
R&D Tax Relief is a very specific area of tax legislation, and getting specialist advice is almost certainly the best way to guarantee the best return. But again - I'm biased. With the information available on this site - you should be able to make an R&D Tax Credit claim yourself. But if you do want advice from a leading, specialist R&D tax advisor - get in touch.
Find out how how companies can meet the deadlines for R&D tax credit claims and all the key R&D tax relief changes coming into place in 2023.
Costs involved in R&D are tax deductible and there are two ways in which R&D costs can reduce a companies Corporation Tax liability. Firstly – with the usual deduction of 100% of the cost from your companies profits. In addition, the R&D Tax Credit scheme allows a further deduction of 130% of eligible R&D costs, […]
Chancellor Jeremy Hunt has announced a series of changes to the UK research and development (R&D) tax relief regime, including a cut to the deduction and credit rates for the SME scheme, the R&D tax credit. The rate of the large company scheme, the R&D expenditure credit (RDEC) will be increased from 13% to 20%, […]