What is R & D Tax Credit?

13 Jul

The UK government has some initiatives to promote research and development oriented businesses. The projects which work solely on research and advancement of technology are required for the strong economic growth of the country. To facilitate this growth, the UK government has initiated the R & D tax credit ( ) facility.

What is R & D Tax Credits?

The R & D tax credit is a scheme introduced by the UK government to help the business units that are working on Research and development activities. This facility can be availed by SME (Small and Medium Enterprises) or by large industries. If your business is R & D related, then your expenses will be very high. Also the risk involved is higher in running such business. Hence to encourage good research, the government has introduced a scheme called as the R&D Tax Credit. As the name suggests, it is a credit that your business unit could avail from the government. The money that you spend in research activities – like staff cost, material costs, software costs and the cost incorporated in hiring contractors can be covered with the R & D Tax credits.

Are you eligible to avail the credit?

There are some set terms and conditions for your business to avail this benefit. The R & D Tax credit scheme is applicable for companies that produce outputs in the domain of technology, medical sciences, new machines, prototypes, new software etc.

•  Your company should be regular payee of the CT (Corporate taxes). A minimum of 2 years is required prior to the time you can avail the R & D tax credit.

•  The research project should be part of your current business and your business should be oriented to improve processes, stability, safety or quality of life of the world. Meaning – it should be helpful to the larger section of the society.

•  Your project should be working extensively on research of some uncertainties in the technology, then you can avail this facility – provided you give a document stating the uncertainties that are faced and how your research is working towards overcoming the problems.

These are some criteria’s in which your business would not qualify for the R & D Tax Credit :

–  If your company is developing commercial products like software – you do not qualify for this; even though it helps the larger masses.

–  Projects working on arts, economics, social sciences and humanities do not qualify for this credit.

What is the process of availing R and D Tax Credits?

Once you know that you are eligible for this credit, availing this is a simple process. You need to fill in the details in the CT (Corporate tax) return form. In your CT return just mention if your company is a SME or a large company availing this facility. Although not mandatory, the HMRC (HM Revenue and Customs) encourages that you to fill in the details of why your project is R & D ( ) qualified and also to add a statement of the costs incurred for the research activity.

Comments Off on What is R & D Tax Credit?

Posted by on July 13, 2016 in Tax


Comments are closed.

%d bloggers like this: