10TH OCTOBER, 2022

R&D Tax Credit claims are easy with Tax Cloud

The R&D Tax Credits scheme means UK companies can claim up to 33p in every £1 of eligible R&D costs back against their Corporation Tax. Even loss-making companies can benefit with a cash payment instead. So you’d think no company would ever think twice about claiming - but in reality that’s not the case.

Many companies don’t claim the R&D Tax Credits they’re entitled to because they think the claim process is too difficult, or the criteria for determining what counts as R&D are too complex. But the good news is that claiming R&D Tax Credits is not as difficult as you might think - especially when you use a handy online claims portal like Tax Cloud.

What is the R&D Tax Credits scheme about?

The R&D Tax Credits scheme is all about encouraging companies to spend money on research and development by allowing them an extra discount on their Corporation Tax liability. Since the scheme began in 2001, HMRC has returned over £21 billion to the economy, and it currently processes around 40,000 claims each year.

Step 1: What companies are eligible?

Any company that is liable for UK Corporation Tax can submit a claim for R&D Tax Credits. The company must be a trading company (not a dormant company) and it must be a going concern when it makes the claim and when it receives any benefit.

Step 2: What activities count as R&D?

HMRC uses the UK government’s own definitions to determine what sort of activities qualify as R&D for tax relief purposes. Your work must be in a field of science or technology, and it must be aiming to make an advance in science or technology, or be an attempt to resolve a scientific or technological uncertainty. While this definition does exclude some activities, it doesn’t limit R&D to any particular industry. If you can show that your work is attempting to make an advance in the science and technology of your industry, or to resolve a scientific or technological uncertainty, you are entitled to claim R&D tax relief.

You should also be able to show that the R&D work you want to claim for was a distinct project, with defined start and end dates, and was separate from the normal course of production activities in your business.

We appreciate this may seem confusing to most and so if in doubt, feel free to drop us a message or give us a call on 020 7360 4437 should you wish to establish your eligibility for R&D Tax Credits.

What about software development?

HMRC is very clear about how it handles a claim for R&D tax relief relating to software development projects. The main thing to know is that just because a commercial software company might call their project “R&D”, it may not actually be classed as R&D for the purposes of R&D Tax Credits. Only those parts of a software project which are aiming to make an advance in technology, or to resolve a technological uncertainty should be included in a claim. Bug fixing, routine updates, and user acceptance testing are examples of activities that would not qualify under HMRC’s definitions. The new guidance also reiterates that once the advance had been made, or the uncertainty had been resolved, the project ceases to be R&D for tax relief purposes.

Step 3: What costs can be claimed for under R&D Tax Credits

If you’re a small company, you can include the following types of costs in your claim for R&D Tax Credits:

  • Staff salary costs, including Employer’s National Insurance, and any company pension contributions
  • Subcontractor costs (usually limited to 65% of invoice value)
  • Externally provided workers (agency staff) (usually limited to 65% of invoice value) Materials consumed in creating prototypes
  • Licence costs for software used for R&D
  • Some kinds of expenses directly incurred by staff and reimbursed by the company.

All of these costs can be claimed in proportion to their relevance to your R&D projects. For example, if a member of staff spends 40% of their time on R&D you can include 40% of their costs in your claim.

If you’re a large company only the following types of costs can be included in your claim for R&D tax relief:

  • Staff salary costs, including Employer’s National Insurance, and any company pension contributions
  • Materials consumed in creating prototypes
  • Licence costs for software used for R&D
  • Some kinds of expenses directly incurred by staff and reimbursed by the company.

Step 4: Putting your claim together

Once you have established what activities qualify as R&D, and what associated costs are valid, you can calculate the amount of tax relief due to you. You could just enter the relevant amounts in your Corporation Tax return, but in that case HMRC could well come back and ask for more information before approving your claim. They are liable to ask you to explain the work you had done, and why you consider it to be R&D. It’s good practice to answer those questions in advance by submitting a descriptive & robust technical report alongside your claim.

Step 5: Make sure you claim on time

You can put in your claim for R&D Tax Credits as part of your regular Corporation Tax return (CT600), which you need to submit within 9 months and 1 day of the end of your accounting period. However, if you’re not ready to submit your claim for R&D Tax Credits at that time you have until 2 years after the end of your accounting period to submit your R&D claim in the form of an amended Corporation Tax return.

Tax Cloud: Your best shortcut to a successful claim for R&D Tax Credits

The Tax Cloud portal, developed by Myriad Associates, means your company can quickly and easily put together a successful R&D Tax Credits claim. Fully guided and supported by our team of R&D tax and funding experts, it’s simply a case of following the steps to insert your costs and create your R&D technical report.

Each stage will only unlock once our specialists have thoroughly checked the previous one and provided any feedback. We’ll also take the time to get to know your company and your project so that no costs are missed off – and no money is left on the table.

Once your claim is complete and you’re totally happy with it, the Tax Cloud portal will submit it to HMRC. The whole thing is done completely online, with nothing to maintain or download, and is accessible 24/7. Plus, as you enter your own figures and technical report, the fee for using the portal is far lower than the full consultancy service.

Why not book a free demo today to find out more and get signed up or drop us a message and we’ll call you back.

Barrie Dowsett, ACMA, GCMA
Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud
Start your Tax Cloud claim now Discover if you qualify and ensure your R&D tax claim is maximised. Get started
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Myriad Associates are the creators of Tax Cloud, we help enterprises navigate, apply and secure tax incentives and grants. We specialise in R&D Tax Credits, Creative Tax Reliefs, Innovate UK grants, Horizons Europe grants, and R&D Capital Allowance Claims.

  • Submitting R&D tax claims since 2001
  • Strong track record spanning 20+ years delivering R&D tax credit claims
  • Over £70m claimed and counting
  • Industry leading specialists
  • We employ technical, costing and tax experts and tax experts
  • Confident of delivering value to our clients, we offer our R&D tax services on a success fee-only basis.

Meet some of the team behind Tax Cloud

Barrie Dowsett Barrie Dowsett ACMA CGMA Chief Executive Officer
Jillian Chambers Jillian Chambers Technical Analyst/Writer
Lauren Olson Lauren Olson Technical Analyst Manager
Rabia Mohammad Rabia Mohammad Corporate Tax Associate