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Zest R&D Tax Blog

by Adam Park | December 21, 2022

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, providing a total 230% deduction. With a Corporation Tax rate of 19% – this provides a tax reduction of 25p in every £1 of R&D expenditure. It’s also worth noting that even companies who are not paying corporation tax can stand to benefit by claiming the Payable Tax Credit. What R&D costs are tax deductible? The types of costs that can qualify for research & development (R&D) tax relief are extensive. They can be broken down into 5 categories: Capital expenditure does not qualify under this scheme, nor does expenditure on the production and distribution of goods and services. However you can receive tax relief on R&D capital expenditure through the R&D Capital Allowances scheme. What’s the process to claim R&D tax credits? R&D tax credit claims are monitored and processed by HMRC and you can make a claim going back 2 accounting periods. Although […]

by Adam Park | November 24, 2022

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%, while the deduction rate for the SME scheme will be reduced from the current 130% to 86%. Also for the SME scheme, the payable tax credit rate will fall from 14.5% to 10%. The Chancellor commented “Despite raising revenue, the OBR has confirmed that these measures have no detrimental impact on the level of R&D investment in the economy. Ahead of the next Budget, we will work with industry to understand what further support R&D intensive SMEs may require.”  What Do The Changes Made in The Autumn Statement Mean For R&D?  The government has committed to increasing the budget to support R&D overall, so there is likely to be increased opportunity for funding through grants. However – for SMEs, particularly those not currently turning a profit, this is a noticeable reduction in the cash benefit of making a claim through the R&D tax relief scheme. […]

by Adam Park | November 29, 2022

On September 29th HMRC released the latest R&D tax credit statistics for 2022. These stats confirm that innovation continues to be key to the success of UK businesses – even during the most testing time of the pandemic. The new tax credit statistics released include finalised figures for the 2018-2019 and 2019-2020 tax years, as well as projected numbers for 2020-2021. These numbers offer some insight into which sectors are claiming and where these claims are coming from. HMRC stats 2022 – the key headlines The total value of R&D tax relief for 2020-2021 is now projected to be nearly £6.6bn. While these are very large numbers by any measure, the projected value of R&D tax relief claims for 2020-21 has fallen (11% reduction) on previous years for the first time ever this year.  The rise in the costs of the R&D scheme has attracted national attention in recent years resulting in a considerable body of work to help contain those costs. What these stats now tell us is that firstly, the projected costs of the R&D schemes have come down, and more importantly, the projected values of the 2019-2020 claims were actually £600m overstated.  Which sectors are claiming the […]

by Adam Park | September 22, 2022

HMRC has recently set out its upcoming reforms to the R&D Tax Relief schemes that will form part of the next Finance Bill. Alongside some minor legislation updates to address anomalies in the schemes, the reforms as they stand will cause four major changes to the schemes. The first of which could catch out start-ups, smaller companies and those who haven’t claimed recently. 1 – Pre-Notification of Claims If you haven’t claimed R&D tax relief in the last 3 years, you will be required to pre-notify HMRC of your intent to claim within 6 months of the end of the claim period. This notification will need to be made online, however if a company has not made a claim in any of the past three accounting periods, they do not need to notify HMRC. Start-up companies and those who might have claimed before, but not in the last three years, need to be aware. The six-month limit applies to the first accounting period – so the ability to go back two years will be impacted if HMRC are not notified. This change will require those companies with no previous claim experience to be much more agile in identifying and assessing […]

by Adam Park | September 9, 2022

If your company has been making a loss, it’s still worthwhile making a claim for R&D tax credits. This is sometimes misunderstood with people thinking that a company needs to be profitable to benefit. In fact, applying for R&D tax credits as a loss making company might be the most beneficial way to get the most from the scheme.

by Adam Park | July 4, 2022

Running a building project is never easy. In fact on many projects – builders, site managers, foreman, construction directors and draughtsman are involved in solving problems for their clients. And solving problems for their clients could mean that their company qualifies for R&D tax credits for construction. The proof is often in the pudding – 8% of R&D claims last year were in the construction industry – with an average claim of about £54,000. There are currently thousands of construction companies across the country working on projects using cutting-edge techniques or developing advances to existing techniques. Although the majority of these could be financially benefiting from valuable R&D Tax Relief, many are unaware that the projects they are undertaking qualify for this support. What qualifies as R&D in Construction To qualify for R&D tax relief – you need to be operating from a limited company. You also need to have performed work that has led to a technical advance in your field. I’ll save you from the technical jargon and give you some examples of work that could qualify: Designing a new way of building on or near listed buildings to maintain its structural integrity Using and testing a new […]