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Debbie Hancock

Owner of Southbourne Accountancy & Business Services

Research and Development - How to get more cash back into your business


In February 2020, the government pledged to increase public investment in R&D to £22bn a year by 2025, meaning there is a significant opportunity for businesses to invest more on innovation and get cash back into their bank. 

R&D is a tax relief which is massively underclaimed by UK businesses, it is money that many businesses need right now. You can claim up to 33% of eligible costs incurred and better still you can go back up to two years. The average claim made by SMEs in the UK is £53,714 (2017-18). 

You can decide if to receive a cash payment now or a corporation tax reduction. R&D exists in every sector, it is not just for scientists in white coats. 

How can R&D help your business get more cash? 

There are two schemes available, this article will concentrate on the SME scheme (companies which have less than 500 staff and either not more than €100 million turnover or €86 million gross assets. Most companies, including start-ups, fall into this category.) 

A SME company that qualifies for R&D tax credits can account for an extra 130% of qualifying costs on top of the 100% already deducted. Loss making companies can in certain circumstances surrender their losses in return for a payable tax credit. 

If as a loss-making company you decided to carry forward that loss for future tax benefits, you may want to consider changing your tax return to so the carried forward loss is a tax credit. This would give you cash now when you might need it most.   

What is R&D? 

HMRC are looking for R&D that seeks to make a worldwide advance in some area of science or technology. It doesn’t have to be earth-shattering and it doesn’t have to succeed. In fact, failure on technical grounds e.g. it was too technically challenging. is often some of the best evidence of a qualifying R&D project!  

The work needs to involve technical ‘uncertainty’ i.e. it’s not straightforward and requires some iterative work and testing; and the work is carried out by staff who have either training or experience in the area of science or technology being advanced. 

Who can claim? 

To be eligible for R&D tax relief, your company must be Limited, and subject to corporation tax. Your company must have fewer than 500 staff and either not more than €100 million turnover or €86 million gross assets. Most companies, including start-ups, fall into this category. 

What are the criteria: 

1) There must have been at least one technical goal.  

2) There must have been at least one significant technological or scientific difficulty to overcome while trying to achieve this goal. 

3) There must have been people with the right skills and experience involved in overcoming this technical goal. 

What do you need to do: 

Once you have established if you have a valid R&D claim you will need to: 

  1. Work out when the R&D project starts and ends. 

  1. Collate qualifying costs 

  1. Complete the calculations 

  1. Send HMRC details to support your R&D claim, you may wish to use the online service. 

  1. Submit you CT600. 

This article does not go into the specifics of the claim and qualifying costs. Please speak to a trained professional if you require additional information and support.  

So, don’t wait to make a claim, assess your projects to determine if your business has been involved in Research and Development and get that cash back into your business’ pockets.  

2. Download our free guide on “stopping your fitness business running out of cash”  https://southbourneaccountancy.co.uk/fitness-ebook/  

3. Download our free Coronavirus support guide: https://southbourneaccountancy.co.uk/coronavirussupport/  

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