R&D Tax Credits, Explained
Research & Development Tax Credits are a tax incentive designed to encourage UK companies to invest in R&D. By using R&D Tax Credits, companies can reclaim up to 33% of the costs of their R&D projects.
In effect, R&D Tax Credits reduce allow companies to reduece their corporation tax bill or claim payable cash credits as a proportion of their R&D spend. They can be claimed on development of a new product, process or service, or improvements to existing ones – even if the work wasn’t successful.
There are three things you need to consider before making an R&D claim, and they’re all covered here. You can use the buttons below to skip ahead.
1. Is Your Business Conducting R&D?
You’d be surprised how much work qualifies. Check out some of the examples and case studies in the section below.
2. What Costs Can You Claim?
How much you’ve spent on staff, subcontractors and other costs, will impact how much you’ll get back. Find out more below.
2. What Costs Can You Claim?
How much you’ve spent on staff, subcontractors and other costs, will impact how much you’ll get back. Find out more below.
3. What Reward Are You Entitled To?
You’ll need to show HMRC you’ve conducted R&D, and in return you could claim up to 33% of your costs back, depending on your financial situation.
3. What Reward Are You Entitled To?
You’ll need to show HMRC you’ve conducted R&D, and in return you could claim up to 33% of your costs back, depending on your financial situation.
Are you conducting R&D?
R&D tax credits don’t just apply to white coat or laboratory-based research. Companies in any industry may be eligible. If there was an attempt to advance the scientific or technical knowledge in your field of work – your project should qualify. Even if it wasn’t successful, you can still claim.
If you’re not sure whether your work qualifies, check out some of the examples and case studies below. Alternatively – book in a free consultation to find out in 15 minutes whether you’ve conducted R&D. Find Out in 15 Minutes →
Could you be conducting R&D without knowing it?
Scroll through to find out what type of projects might apply.
Case Studies
Here are some examples of clients we’ve helped with R&D Tax Credits. Whether you’ve spent £10,000 or £10,000,000 on R&D, we can help you get the benefit you deserve. To see more examples – Case Studies →
R&D Tax Credit Reviews for New Zest Clients Increase Previous Claims by 110%
Find out how Zests’ tax credit review process improves results for our new clients, increasing their claims by 110% of their previous value.
Dairy R&D | Farm Claims £145,000 using Tax Credits for On-Farm Research and Development
Find out how we saved our client £145,000 for on farm research they conducted to maximise their herds performance.
£360,000 Farming R&D Tax Credit Claim | Innovative South Wales Farm Claims Money with Specialist Help from Zest R&D
Find out how Zest maximised our clients farming research and development tax credit claim.
Software Development R&D | Client Receives £50,000 in Tax Relief
This client reduced their corporation tax bill by £50k in a single year, through a Research and Development Tax Credit claim for their Software Development R&D.
£18,000 Saved With Software R&D Claim | Leading Laboratory Equipment Recycling Firm Claims R&D Tax Credits with Zest
Find out about how we saved this laboratory equipment recycling company £18,000 with an R&D tax credit claim.
Genuine Jay Jays Make a Substantial R&D Tax Credits Claim for Innovative Manufacturing Techniques
An example of a research and development tax credit claim for an innovative military equipment manufacturer.
To see more examples – Case Studies →
Request a free consultation
Find out in 15 minutes whether you’re eligible for R&D Tax Credits.
Request a free consultation
Find out in 15 minutes whether you’re eligible for R&D Tax Credits.
What Costs Can You Claim For?
You can’t claim for all of your R&D expenditure. For example – costs that don’t directly relate to the R&D project, such as payroll or accounting, can’t be included. Here are the types of costs you can claim.
For more detail on each of these costs – read this article: R&D Tax Credits – Claimable Costs →
Staff costs for any time spent on the R&D projects, including any National Insurance and Pension contributions.
65% of any costs related to freelancers or companies subcontracted to help with the R&D.
Consumable items, including any materials used within the R&D for prototyping.
The cost of any software used as part of the R&D process.
The relevant proportion of water, fuel or power consumed as part of the R&D.
What Costs Can You Claim For?
You can’t claim for all of your R&D expenditure. For example – costs that don’t directly relate to the R&D project, such as payroll or accounting, can’t be included. Here are the types of costs you can claim.
For more detail on each of these costs – read this article: R&D Tax Credits – Claimable Costs →
Staff costs for any time spent on R&D projects, including any National Insurance and Pension contributions.
65% of any costs related to freelancers or companies subcontracted to help with the R&D.
Consumable items, including any materials used within the R&D.
The cost of any software used as part of the R&D process.
The relevant proportion of water, fuel or power consumed as part of the R&D.
What Reward Are You Entitled To?
There are two ways of benefiting from the R&D Tax Credit. Either way – you’ll need to ask your accountant to submit or amend your corporation tax return for the year you did your R&D.
1. A reduction or refund in corporation tax
Profit making companies can receive up to 25% of its Research & Development costs back, by reducing its corporation tax liability. It could even use the tax credit to reduce its corporation tax bill across other group companies.
2. A payable tax credit
A loss making company can receive up to 33% of its Research & Development costs back, by surrendering losses related to their trade. This means they could access cash now, instead of carrying accounting losses forward.
If you’ve only paid a modest amount of corporation tax – you could qualify for both of these.
Now to the important part – how much could you get back. Try our calculator to give you an estimate.
What Reward Are You Entitled To?
There are two ways of benefiting from the R&D Tax Credit. Either way – you’ll need to ask your accountant to submit or amend your corporation tax return for the year you did your R&D.
1. A reduction or refund in corporation tax
Profit making companies can receive up to 25% of its Research & Development costs back, by reducing its corporation tax liability. It could even use the tax credit to reduce its corporation tax bill across other group companies.
2. A payable tax credit
A loss making company can receive up to 33% of its Research & Development costs back, by surrendering losses related to their trade. This means they could access cash now, instead of carrying accounting losses forward.
If you’ve only paid a modest amount of corporation tax – you could qualify for both of these.
Now to the important part – how much could you get back. Try our calculator to give you an estimate.
Find Out How Much You Could Claim
Use our calculator to estimate your tax credits.
What is the financial position of your company?
What is your estimated spend on R&D per year?
We estimate you could receive up to
£6,175
as a tax credit.
To reward businesses for their investment, the government allows you to enhance your qualifying expenditure.
£25,000 x 130% (enhancement rate) = £32,500
x 19% (Corporation Tax rate) = £6,175
£6,175 / £25,000 = 25%
We estimate you could receive up to
£30,875
as a tax credit.
To reward businesses for their investment, the government allows you to enhance your qualifying expenditure.
£125,000 x 130% (enhancement rate) = £162,500
x 19% (Corporation Tax rate) = £30,875
£30,875 / £125,000 = 25%
We estimate you could receive up to
£61,750
as a tax refund or reduced tax liability.
To reward businesses for their investment, the government allows you to enhance your qualifying expenditure.
£250,000 x 130% (enhancement rate) = £325,000
x 19% (Corporation Tax rate) = £61,750
£61,750 / £250,000 = 25%
We estimate you could receive up to
£247,000
as a tax refund or reduced tax liability.
To reward businesses for their investment, the government allows you to enhance your qualifying expenditure.
£1,000,000 x 130% (enhancement rate) = £1,300,000
x 19% (Corporation Tax rate) = £247,000
£247,000 / £1,000,000 = 25%
What is your estimated spend on R&D per year?
We estimate you could receive up to
£16,675
as a tax credit.
To reward businesses for their investment, the government allows you to enhance your qualifying expenditure.
£50,000 x 130% (enhancement rate) = £65,000
£50,000 + £65,000 (enhancement) = £115,000 (enhanced expenditure)
£115,000 x 14.5% (surrender rate) = £16,675
£16,675 / £50,000 = 33.35%
We estimate you could receive up to
£83,375
as a tax credit.
To reward businesses for their investment, the government allows you to enhance your qualifying expenditure.
£250,000 x 130% (enhancement rate) = £325,000
£250,000 + £325,000 (enhancement) = £575,000 (enhanced expenditure)
£575,000 x 14.5% (surrender rate) = £83,375
£83,375 / £250,000 = 33.35%
We estimate you could receive up to
£166,750
as a tax credit.
To reward businesses for their investment, the government allows you to enhance your qualifying expenditure.
£500,000 x 130% (enhancement rate) = £650,000
£500,000 + £650,000 (enhancement) = £1,150,000 (enhanced expenditure)
£1,150,000 x 14.5% (surrender rate) = £166,750
£166,750 / £500,000 = 33.35%
We estimate you could receive up to
£333,500
as a tax credit.
To reward businesses for their investment, the government allows you to enhance your qualifying expenditure.
£1,000,000 x 130% (enhancement rate) = £1,300,000
£1,000,000 + £1,300,000 (enhancement) = £2,300,000 (enhanced expenditure)
£2,0,300,000 x 14.5% (surrender rate) = £333,500
£333,500 / £1,000,000 = 33.35%