What Is R and D Tax Credit and How Does It Work for A Business

Research and development tax credit is a significant government tax relief that helps UK companies financially to make investment in the areas of innovation. Such companies are entitled to a corporation tax reduction or cash payment.

What are R&D tax credit rates?

These rates are equal to 33points for every £1 of qualifying expense towards performing innovation related activities such as research and development funding.

What comes under R&D?

For tax objective, R&D requirements are broad. Following activities are qualified under R and D tax credits:

  • Creation of new products, services and processes.
  • Bringing changes or modification in an existing product, service or process.
  • Any work that is undertaken for a client and your own project

How much does R&D costs claim for?

Below mentioned expenditure is eligible for an R&D tax credit claim:

  • Expenditure incurred on staff that includes salaries, employer’s pension contributions and NIC.
  • Expenditure incurred by freelancers and subcontractors.
  • Expenditure incurred on consumables and materials that includes heat, power and light that are used/transformed by the R and D process.
  • Expenditure on a few types of software.

Who can claim for R&D reliefs?

This tax credit relief can be claimed by those companies that seek to develop or research an advancement in their business area. It helps in supporting companies that perform work on advanced science and technology based projects. It can be claimed by a range of companies that seek to research or develop an advancement in their field. The interesting part of this relief is that it can also be claimed on projects that have been unsuccessful.

What types of projects can count under R&D?

All that work that qualifies for R&D tax credit relief has to be a part of a particular project to use latest inventions and discoveries in science and technology. This project can either be related to the company’s trade or one that you plan to begin based on the outcome of the R&D. To receive the tax credit, you need to prove that your project aimed at creating an advancement in the entire field, and not just for the business.

How can assistance of tax repayment agencies help you?

There are several tax repayment agencies that perform filing of tax credit claims on behalf of their clients. They have thorough knowledge of tax laws that are needed for performing the claim procedure.

These agencies assist SMEs across all sectors to receive millions of dollars every month to invest again into the businesses. Team of chartered tax advisers at these firms help SMEs save time by creating a robust claim that exposes all R and D costs and activity. Their end-to-end SME service includes working with HMRC.

From downloading the claim form and acquiring relevant information from clients to filing the claim and intimating the client on the response, they will perform the entire task in the ethical and efficient way.


RnD tax credit relief is especially helpful for companies that aim at spending money in developing new branded products, processes, services or improving existing ones. Getting proper knowledge of this field and implementing it in the right way will surely help in reaping its benefits.