Services & Sectors

Research & Development

MEET OUR Research & Development TEAM

The R&D Team at CBW has many years’ experience in making R&D claims on behalf of clients across a variety of sectors.

The UK Research & Development Scheme offers an additional tax deduction against taxable profits, or a payable tax credit to companies which incur qualifying expenditure on eligible R&D activities. R&D tax relief is available across all types of industries and sectors, and any size of company.

Sectors:
Whilst the R&D team acts for many clients in the software development space, their work is by no means limited to this sector.  The team enjoys working with companies to help identify R&D opportunities that the client wouldn’t have otherwise known were there.  For some this is simply because they are traditional companies who have more recently had to change the way they do business to keep ahead of the market, and R&D is the last thing on their mind.

Sectors in which we’ve helped clients make R&D claims include, but are not limited to: dentists, jewellers, waste management, travel, software, gaming, furniture, manufacturing (to include tool manufacturers and bicycle manufacturers), infrastructure and retail.

R&D tax relief is available to companies that are within the charge to UK Corporation Tax.

How to Claim?
The team is led by Toby Hermitage who has been involved in tax reliefs for R&D for over 20 years and has secured over £50m in tax benefits for clients over that period, with a 100% success record.

Who qualifies for R&D Tax Relief?
There are two different schemes for claiming relief, depending of the size of your company:

1. Small or Medium-sized Enterprise (SME) Scheme

  • SME companies can claim R&D tax relief on 230% of their qualifying revenue expenditure on R&D
  • If your company is profitable, the relief is just under 25%
  • If your company is loss-making, which is often the case after the increased deductions available under the R&D scheme are claimed, you can sell the tax loss arising to HMRC for a 14.5% credit. Under this scenario the overall tax saving is around 33% of the qualifying expenditure

An SME for R&D purposes is a company meeting the EU SME definition below. Where a company is a member of a group then the tests apply on group basis.

SME Limits
Number of employees <500
And one of the following:
Annual Turnover ≤EUR 100m
Balance Sheet Total ≤EUR 86m

2. Large Company Scheme/RDEC

  • The RDEC (R&D expenditure credit) scheme offers a tax credit of 12% and enables companies to claim back up to 10p (after the deduction of Corporation Tax) for every £1 spent on qualifying research and development (R&D) activities. Unlike the scheme for SMEs, this rate remains the same whether you are profit or loss making
  • The RDEC scheme is primarily for large companies i.e. companies that do not fall within the SME limits above
  • Some SMEs also claim R&D tax credits via RDEC for a portion, or all, of their R&D expenditure. This is because the rules for the SME R&D tax credit scheme include some restrictions for grant-funded projects and projects subcontracted to an SME by a large company

What Expenditure Qualifies?

R&D qualifying revenue expenditure includes:

  • Salary costs (including employer’s NI and pension contributions) for employees directly involved in the R&D work, and of those indirectly involved in eligible R&D projects
  • 65% of R&D subcontracted to third parties. This would include the cost of the services provided
  • 65% of contract staff costs involved in the R&D work
  • The cost of consumable items employed in the R&D process
  • Cost of software licenses and power, fuel and water used in the R&D projects

1. Profitable SME

Business profits £200,000
Corporation Tax before R&D claim @ 19% £38,000
Business incurred £50,000 of R&D expenditure
Profit before R&D claim
R&D Enhanced Deduction (50,000 x 130%)

200,000
65,000

Revised Profit 135,000
Revised Corporation Tax at 19% 25,650
Corporation Tax Saved (£38,000 –£25,650 = £12,350) i.e. approx. 25% saving 12,350

2. Loss-making SME

Business loss £200,000
Business incurred £50,000 of R&D expenditure
Loss for the year before R&D claim
R&D Enhanced Deduction (50,000 x 130%)

200,000
65,000

Revised Loss for the year 265,000
Maximum losses available to surrender
to HMRC (230% x 50,000 R&D costs)
115,000
Maximum Tax Credit Received
(115,000 x 14.5%) i.e. approx. 33% saving
16,675