The FI Group way to help you claim R&D Tax
We understand that creating something new isn’t easy. It takes time and dedication to create something that is working and ready for market or the workplace. Sometimes R&D innovation needs to go further and budget restraints
can stop you dead in your tracks.
At FI Group, we specialise in helping innovative businesses and people to stretch their R&D budgets further. We do this by understanding you and your project and then work with the government to claim back tax credits and relief to
ensure that your light bulb moments don’t get switched off just as your ideas are powering up.
We don’t charge unless we’re successful.
Our fees are taken as a portion of the credit or repayment HMRC gives you.
Our terms of service have no nasty surprises or hidden extras.
The Research and Development tax credit scheme is the main source of government support in the UK for innovative companies. As a rule, if you have employed professional engineers, developers or other technical specialists to develop an innovative or new solution to an existing problem and can demonstrate significant expenditure, then this is very likely that the above criteria will be fulfilled.
What are R&D Tax Credits?
The Research and Development tax credit scheme is the main source of government support in the UK for innovative companies. For almost twenty years, FI Group has been helping companies to finance their innovative projects through the management of R&D tax incentives and other financial sources
How do I know if my project is eligible for an R&D Tax Credit claim?
This will be fulfilled if you have employed professional engineers, developers or other specialists to develop an innovative new solution. This needs to be an existing problem and can demonstrate significant expenditure on this.
- Technical Uncertainty – if the uncertainties that the project tackles are readily deducible by an experienced professional, then it is unlikely to be R&D. An example might be that the solution is easily found.
- Innovation – if the project delivered an outcome classed as common knowledge, then it would fail the innovation test for R&D.
- Cost – there is no lower limit on expenditure. However, the higher the amount spent on a project, the more likely it will qualify for tax relief. This is due to the high cost of the majority of research and development.
- Qualifications – If you have been employing ‘competent professionals’. These may be qualified technical experts in a specific field. Then this could indicate R&D eligibility.
What costs can I claim back?
You would be able to claim if, for example, the below went towards R&D costs.
- that your spend on payments for staff
- or other workers (including crucial employer costs such as pension contributions)
You’re also able to apply for R&D tax deductions on the basis of your spending on materials. This also applies to your staff costs. For example, any spending you make on vital commodities (such as power costs, basic needs for your factory or workspace, or heating costs incurred as a result of R&D) can be claimed as a cost. Therefore, it is worth making the most of it.
For companies with a technological twist, the rules governing R&D credit claims are also applicable to certain types of software. One of our Tax Consultants can advise you on the specifics of these parameters.
What does my business need to do to claim R&D tax credits?
Your business must be engaged in finding solutions to “scientific or technological uncertainties” to claim R&D Tax Credit.
However, this is a nebulous concept – so there are plenty of possible ways you can gain R&D relief.
If you produce a new product, for example, it’s possible that you will be able to claim for some of the research. The same goes for companies who create a new service or process. Therefore, even if you’re not in the manufacturing business, you may still be able to claim R&D credit.
Moreover, if your project cover changes to a product or service developed previously, you may also claim R&D tax credits.
There are a couple of important caveats, which increase your beneficiaries when it comes to the R&D tax credits rules.
Firstly, agencies or providers carrying out multiple actions, on behalf of their clients, may also claim R&D tax credits. In addition, it doesn’t matter if your attempts at research and development were successful. There’s still a chance you can claim R&D credits. This may be even if it didn’t work out. Therefore, make sure to keep all your documents and evidence in order to make a claim.
What is the minimum expenditure for an R&D tax credit claim?
There is no minimum expenditure on qualifying R&D required in order to make a claim for a tax credit. This wasn’t previously the case. Until 1st April 2012 it was necessary to spend at least £10,000 on qualified R&D projects to be eligible for a claim.
However, smaller amounts of expenditure may suggest that the project wasn’t necessarily true R&D. This is because of the costs involved in hiring the experts needed to develop new solutions to existing problems. In addition, software and materials imply that a higher spend corresponds to the existence of R&D.
If your expenditure is small, but you still consider it to be true R&D, taking advice from an expert R&D Tax Consultant at FI Group can help you to produce a robust Technical Report for HMRC to ensure you get the rewards you deserve for your innovation.
Can SMEs claim for R&D tax credits?
Yes, SMEs can claim research & development (R&D) tax credits, provided that the following conditions are met:
- They are subject to UK Corporation Tax
- The company is a going concern and not going into administration
- The SME’s balance sheet meets monetary thresholds
- The SME delivers a trade which relates to R&D activities that it seeks to claim for
It is a myth that being in receipt of a subsidy or grant funding excludes a company from claiming R&D tax relief. If you have received such funding, you may be eligible to claim some R&D expenditure under the SME Scheme.
Furthermore, it is likely that you can also claim the rest of the expenditure under the large company scheme (RDEC). FI Group online claim platform, My R&D Claim, is specifically designed for start-ups and SMEs. We automatically calculate what expenditure can be claimed under which scheme.
FI Group always encourages businesses to seek specialist advice to determine which projects may be eligible for R&D tax relief. This is especially true when additional external funding sources are involved. Our team can help you assess your eligibility for R&D tax credits and grants. Simultaneously, what other types of public funding are available for your UK businesses of R&D development activity.
How far back can I go when claiming for R&D tax relief?
The time limit for a research & development tax relief claim is two years – measured from the end of your business’ accounting period. This ties in with the deadline for amending any Corporation Tax returns. If you are a business operating in your first year, you may have a different timeline. Your incorporation date creates the registration date. Therefore, your first accounting period is defined as twelve months from the end of that nominated month. Make sure this applies going forward, as you can choose to amend your accounting period.
When will I receive the payment for the R&D tax credit?
HMRC advise that claims take a minimum of 28 working days to process from the point of submission. Although this is sometimes shorter, it may be significantly longer for large or complex claims. Once your claim is approved it can take up to six weeks to receive the payment from HMRC.
It is always worth allowing extra time in case your claim is taken to inquiry. Your FI Group R&D Tax Consultant will be able to advise on the likelihood of this ahead of submission. We can also help you assess how far back your particular business can claim.
What is a “Competent Professional”?
The HMRC legislation talks about “competent professionals” as being those that lead your research and development activity. This refers to someone in the industry with the right qualifications, experience, skills and track record for the job in hand. For example, this might be a process engineer in a chemical manufacturing plant, or it might be a Software developer in a software house.
There are no exact requirements for what constitutes a competent professional, so don’t worry if you think your team won’t meet the criteria. HMRC understands that older employees may not have specific qualifications as started out in their industry at 16 and have worked in it ever since – they are still considered competent professionals.
Essentially, within your business, this individual is the person who is best placed to make a judgement about the activities that count towards R&D. A ‘competent professional’ within the business must assess the projects which qualify for an R&D tax credit, the project boundaries and the applicable activities. They will then apportion expenditure to those identified activities. It is vital that accurate and detailed biographical information of your technical professional is included in the technical narrative that you submit with your R&D tax claim. This demonstrates to HMRC that you have applied due care and attention and applied the correct boundaries when assessing qualifying activity.
How to prepare for an R&D Tax Claim
Know which scheme you qualify under
One of the first things you need to do when preparing for your R&D tax credit claim is to determine which scheme you qualify under. This is either going to be the RDEC scheme or the SME scheme. You will fit into the latter category if you have fewer than 500 staff and you have either 86 million EUR gross assets or 100 million EUR turnover. If your business is bigger than this, you will file your claim under the RDEC scheme. In terms of qualifying expenditure, both schemes are similar. However, the SME scheme is more generous.
If you are an SME that has received grant funding or subsidies then you may also be eligible to claim under RDEC as well as the SME scheme. The rules around this can be quite confusing but our R&D Tax Consultants have submitted hundreds of similar claims and will be able to help you navigate your way through it!
Figure out what DOES and doesn’t QUALIFY
Once you know the scheme your business comes under, you then need to determine what qualifies for R&D tax relief and what doesn’t. After all, the last thing you want to do is unintentionally raise a red flag with HMRC, which could lead to an enquiry into your business.
Under the SME scheme, consumables, externally provided workers, subcontractors, staffing costs and software licenses are qualifying costs. For RDEC it is similar but subcontractors must be either a charity, an individual, a partnership of individuals, or a “qualifying body”. For either scheme you can claim for payments made to clinical trial volunteers. A lot of business owners make mistakes when it comes to filing their claim, and one of these errors is claiming directors as subcontractors. This is not allowed. Another error is claiming for the HMRC tax year, rather than your company’s financial period. With over 20 years’ experience in R&D Tax, the Consultancy Team at FI Group can assess what qualifies for you thoroughly and efficiently – meaning you can get on with the actual R&D!
Choose the right project
Once you’ve dealt with what qualifies and what scheme you fall under, you need to consider the actual work you have carried out. Ensure you choose the correct projects to claim for when submitting your technical narrative. You should try to include descriptions that cover at least half of all the expenditure included within the claim. In most cases, more than one project will be included in a claim.
Seek professional assistance
Seeking the help of a qualified professional is by far the simplest way to claim your R&D tax relief. Make sure to choose a consultant with competitive rates and a long track record of successful claims.
How FI Group helps you claim R&D tax credits
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- Initial Assessment – We always suggest an initial telephone conversation to discuss the nature of your business and the types of projects you are undertaking or have completed. This allows us to assess early in the process whether there is any potential research and development that qualifies for tax relief. This is part of our commitment to ensuring the whole claim process is time-efficient for you, and, our experts are so experienced that it doesn’t take them long to determine the presence and level of qualifying expenditure in your business.
- Getting the details right – Once we’ve determined that your business has projects that will qualify for R&D Tax Relief we will arrange to come and meet with you at your premises to identify all of the projects that should be included. There may be areas that qualify that you have previously had discounted by advisors but, as all of our Consultants are Technical Experts in their scientific and technological fields, we are able to uncover sources of claimable expenditure often missed by other consultancies. We will also collate the names of the project leads or employees responsible for the R&D activity and the Financial or Human Resources head responsible for salaries and utilities. This ensures that we can arrange to collect the information we need without being a burden to you and your employees unnecessarily.
What we do
- We compile your claim – We will then arrange to conduct a series of technical interviews with the relevant employees. These can be done over the phone or in person – whichever is more convenient for you – and it will provide us with all the project details and financial information we need to compile your claim. At this stage we will produce an estimate of all the eligible R&D expenditure and what you can expect to receive back. This will also give you an estimate of the fees payable to us, although we do not invoice you for this until you have received your money from HMRC.
- We make it happen – The next step is to complete your R&D tax credit claim and send it to HMRC. We’re an expert in this process of how to claim R&D tax credits and have already helped thousands of business’ Through this process we’ve developed a thorough methodology for making these calculations which means your claim will be highly detailed and accurate. Once we’re happy we’ll provide the report to your accountant so they can amend your CT600 Corporation Tax Return with our calculations. We always work very closely with our customers accountants to ensure a smooth submission process.
- We deal with HMRC – Now, we wait. We’ll make sure HMRC has all the details they need for your R&D claim. We take pride in getting this right. We’ll follow-up on how your claim is going, and deal with any questions the authorities have about it. HMRC advise that it will take a minimum of 28 days to process a claim, although it can be sooner. In some cases, HMRC will open an enquiry about tax credit claims. If that happens then you can leave it in our hands at no additional cost, although we have not had a single enquiry opened into any of our UK claims so far!
- You receive your credit – Once the the claim has been approved it usually takes HMRC up to six weeks to credit your bank account.
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