R&D Tax Relief

Advisory

Innovation Incentives - R&D Tax Relief:

R&D (Research and Development) Tax Relief is a government incentive designed to incentivise companies undertaking innovative projects that seek to advance the overall knowledge or capability of a field of science or technology. Since its inception, the scheme has undergone significant changes, including consolidating the SME and RDEC schemes into a single, unified scheme. This new scheme will apply to accounting periods beginning on or after April 1, 2024. Additionally, a separate R&D-intensive scheme has been introduced, specifically tailored for loss-making SMEs heavily involved in R&D activities.

Criteria for claiming R&D Tax Relief

1. Eligibility of the Business:

Corporate Status: Only companies that are liable to pay Corporation Tax in the UK can claim R&D tax relief. This includes:

  • Companies in any sector or industry.

  • Both profit-making and loss-making companies.

  • Size Classification: The eligibility and the type of relief available depend on the size of the company.

2. Qualifying R&D Projects:

Purpose: The project must seek to achieve an advance in overall knowledge or capability in a field of science or technology. It should not just advance the company’s own state of knowledge.

  • Uncertainty: The project must seek to overcome some form of scientific or technological uncertainties.

  • Resolution: The company must demonstrate that it has attempted to resolve the uncertainty through a systematic process of investigation or experimentation.

  • Documentation: Detailed records should be kept showing the steps taken to overcome the uncertainties and achieve the advancement.

3. Qualifying R&D Activities:

Directly Contributing Activities: Activities that directly contribute to the resolution of scientific or technological uncertainty, such as:

  • Developing new or improved products, processes, or services.

  • Experimentation and prototyping.

  • Design and testing of hypotheses.

  • Scientific and technological analysis.

  • Indirect Supporting Activities: Activities necessary to support the directly contributing activities, such as:

    • Project planning and management.

    • Feasibility studies including supporting testing and data collection.

4. Qualifying R&D Expenditure:

Qualifying R&D Expenditures:

  • Staff Costs: Gross salaries, bonuses, reimbursed travel costs and employer’s NICs, and pension contributions for employees engaged in the R&D project.

  • Subcontracted R&D: Payments to subcontractors for R&D activities. The eligibility of subcontracted costs differs between the SME and RDEC schemes.

  • Consumable Items: Materials and utilities used up or transformed during the R&D process, such as chemicals, materials, fuel, power, and water. This could include the costs of producing and testing prototypes, excluding those produced for sale.

  • Software Costs: Software license fees and costs that are directly related to R&D activities. For accounting periods beginning on/after 1st April 2023, the categories of qualifying expenditure are extended to include the relevant elements of data licence and cloud computing costs necessary for R&D purposes.

  • Externally Provided Workers: Workers supplied by a staff provider such as an employment agency can potentially be claimed upon up to 100% of the payments made to them.

Our Approach to Preparing Your R&D Tax Relief Claim

  • 1. Initial Consultation

    • Understanding Your Business: We begin with a thorough consultation to understand your business operations, objectives, and the specific R&D activities you undertake. This enables us to identify qualifying projects and activities accurately.

    • Customised Assessment: Our experts will conduct a preliminary assessment of your R&D projects to determine eligibility and identify the potential scope of the claim.

  • 2. Detailed Analysis & Documentation

    • In-Depth Review: Our multidisciplinary team—comprising of finance and tax law specialists, along with industry experts such as our in-house engineers, software developers, and researchers will conduct a thorough analysis of your R&D activities.

    • Project Documentation: We will assist you in documenting the R&D projects, focusing on the technical challenges, uncertainties, and advancements achieved. This documentation is critical for substantiating your claim.

    • Expenditure Analysis: Our team will review and categorise all relevant R&D expenditures, including staff costs, subcontractor fees, materials, and any other qualifying expenses. We will then collaborate with you to determine the proportion of the overall spend that qualifies for R&D tax relief, based on HMRC’s guidelines and our extensive experience within the industry, ensuring accuracy and compliance with the latest regulations.

  • 3. Preparation of the R&D Report

    • Comprehensive Report: We will prepare a comprehensive R&D report that outlines the scope of the R&D activities, the technological or scientific uncertainties encountered, and the steps taken to resolve these uncertainties.

    • Supporting Evidence: The report will be supported by detailed evidence and documentation to ensure compliance with HMRC guidelines and to maximise the claim's credibility.

  • 4. Internal Westlock Partners Review & Client Approval

    · The Westlock Approval: Prior to finalising the R&D tax relief report, the report and all calculations prepared will undergo a rigorous internal quality control review process to ensure accuracy and compliance. This review is conducted by our senior specialists who are independent of the initial report drafting team, ensuring an unbiased evaluation. The process includes a thorough examination of all supporting documentation and calculations, verification of the qualifying activities and expenditures, and a detailed check for adherence to HMRC guidelines. Any discrepancies or areas of improvement are addressed and rectified before the report is shared with you for your approval and submission. This comprehensive review step ensures that the report not only meets Westlock Partners highest standards of quality and precision but also ensures the claim is maximised to the extent permitted by all relevant laws and guidance.

    · Client Approval: Upon completion of our internal quality control review process, the R&D tax relief report will be provided to you for your review and approval. We encourage you to carefully examine the report and provide any feedback or ask questions about the findings, calculations, and conclusions presented. Our team will be readily available to address any concerns or discuss any clarifications needed. This collaborative review ensures that the report accurately reflects your R&D activities and expenditures, and that you are fully satisfied and confident in the submission. Once you have approved the report, we will proceed with the filing process with the relevant authorities.

  • 5. Claim Submission

    • Filing the Claim: We can either file the R&D tax relief claim as part of the company’s Corporation Tax return (CT600) return or liaise with the company’s accountants/ tax advisors as necessary to assist them with submission on the company’s behalf.

  • 6. HMRC Communication & Support

    • Liaison with HMRC: We will handle all communications with HMRC on your behalf, responding to any queries or requests for additional information.

    • Comprehensive Enquiry Defence: In the event of an HMRC enquiry, our experts will provide full support and guidance, leveraging our experience and expertise to defend you and your claim before HMRC.

  • 7. Continuous Improvement & Future Planning

    • Feedback and Review: After the claim process is complete, we will provide feedback on the outcome and review the process to identify areas for improvement.

    • Strategic Planning: We will work with you to develop strategies for future R&D projects, ensuring that you continue to benefit from the R&D tax relief scheme and maximise your financial potential.

Why Choose Westlock Partners?

Choosing Westlock Partners means choosing a team that is committed to delivering exceptional value and results. Our expertise in R&D tax relief, combined with our partner-led approach, ensures that your claim is handled with the utmost professionalism and attention to detail. Let us help you realise the full potential of your R&D investments and achieve your strategic goals.

Book a meeting with our team now: