R&D Tax

The R&D Tax Scheme was designed by the government in 2010 as an incentive to encourage companies to invest into the research and development of their field, in addition to rewarding innovative thinking from UK SME’s exploring new products and niche markets.

A common misconception is that R&D tax relief is only relevant and applicable to the manufacturing industry, when in fact there are a plethora of sectors whose research and development projects would qualify.

What qualifies for R&D Tax relief?

To qualify for R&D tax relief, the project being carried out must look to achieve progression in a field of technology or science, whilst relating to your businesses current trade or a trade intended to start following the conclusion and result of the research and development that is carried out. Small and medium-sized businesses can benefit from an enhanced rate of R&D tax credits in
comparison to larger businesses, providing that the business has:

  • Fewer than 500 employees
  • An annual turnover lower than €100 million
  • A balance sheet total not exceeding €86 million

If these criteria are met, they are eligible to apply for the Small or Medium-sized Enterprise (SME) Scheme and reap further benefits.

What costs are applicable to the R&D tax relief scheme?

There are a number of costs that if incurred throughout the duration of the research and development, can qualify as part of your claim.

  • Employee costs: Any staff employed to be actively engaged in carrying out research and development that is under a direct contract, rather than a consultant or agency worker, is eligible to be included within the cost reclaimed. In addition to this, paying a staff provider who is also involved with sourcing staff to have direct input with research and development can also be included within the claim.
  • Materials, utilities and software: Physically consumable or transformable materials, in addition to power, water and fuel used directly in conjunction with carrying out a research and development project are all eligible to claim through R&D tax relief. Not only this, but any computer software used to directly carry out R&D can be included. The only costs excluded from these claims are telecommunication and data costs.

What are the benefits?

As a result of a successful R&D tax claim, there are a myriad of benefits to your business. Many people often use the relief to pay off tax bills or various other debts, relieving cash flow pressures within the business. Not only this, but the money claimed back from a research and development project can fund the launch of a new product or service, or the all-important investment into new equipment essential to the growth and service delivered by a business. Ultimately, the championing result of the Research & Development Tax Relief Scheme is allowing businesses to grow and develop – something of great importance to SME’s.

When and how should you apply for R&D tax relief?

When submitting your corporation tax return, simply put an ‘X’ in box 99 (SME), and the enhanced expenditure in box 101 – as simple as an ‘X’ and a number! However, we would recommend speaking to a member of our experienced team for advice and guidance when making your claim, to ensure that each section of criteria is correctly met, and that you claim back every penny from your research and development project.

You may also need to inform HMRC of why you feel your business is eligible for R&D tax relief, in addition to a summary of the costs occurred. There is normally a time limit of ensuring you make your claim within 2 years following the end of the tax return accounting period, and hopefully you are still within this time frame! If you do feel as though your business is eligible to make an R&D tax claim, it is important to remember to keep sufficient records of your project should HMRC request to see them, that way you can ensure that once you have applied, it is likely your claim will be successful.


If your business may benefit from any advice and guidance relating to R&D tax, please don’t hesitate to get in touch with a member of our team who will be more than happy to support you throughout your claim. Contact our Manchester office on 0161 905 1801 or our Warrington office on 0192 583 0830.