Did your large business benefit from this tax incentive? If not it could be time to find out if you are eligible for this valuable tax relief.
What is the Research and Development Expenditure Credit (RDEC) scheme?
The government introduced a tax incentive for large companies, imaginatively called ‘The Large Company Scheme’ in 2002 to encourage investment in research and development and drive innovation in the UK. Large companies are given a taxable credit of 12% (11% prior to the 1st January 2018) on qualifying expenditure on research and development.
The initiative has been supported by successive governments. This is because the underlying philosophy is that innovation and the development of new technologies, is fundamental to the success of UK Plc.
An HMRC report on the Evaluation of Research and Development Tax Credits, shows that for every £1 paid by HMRC on R&D tax relief, generates R&D spending of up to £2.35.
As a result of the evolving R&D Tax Credit schemes, the Large Company scheme was changed to the Research and Development Expenditure Credit (REDC) scheme in 2013. Following this, there was a gradual phase out of the original Large Company scheme, however, since April 2016, this has been completely replaced by REDC.
What research and development qualifies for Research and Development Expenditure Credit (RDEC)?
If you can answer yes to the following two questions, there is a high probability that you qualify.
Are you producing new or improved products, processes, services or software?
Did the design and development of those products involve some uncertainty for which the answers were not obvious?
If the answer to both questions is yes, the chances are that you could qualify for R&D Tax Credit. As a result, answering this is probably the most complex part of the R&D Tax Credit process, as it’s an area open to interpretation. Thankfully, this is where our specialist skills, along with our extensive experience is particularly useful!
Read our blog “What qualifies as R&D?” for some examples of qualifying R&D.
What expenditure is eligible for R&D Tax Credits?
Staffing Costs
Software
Independent Research
Consumables
Clinical Trials
Prototyping
Is the Research and Development Expenditure Credits (RDEC) scheme, right for you?
The legislation is quite complex, however, the criteria for a company to claim under the RDEC scheme, is that they employ more than 500 full time members of staff. Alongside this, the company would need a turnover of more than €100m or over €86m gross assets on their balance sheet.
If you do not meet the criteria to be classified as a large company for the RDEC scheme, don’t worry. You may be still eligible for relief under the SME scheme.
The incentive for companies to claim RDEC
Under the RDEC scheme, 13% of qualifying expenditure on R&D can be claimed (Before 1st April 2020 the rate was 12%).
As RDEC is taxable this means that the net benefit will be 9.7 pence for every £1 spent on qualifying research and development.
Loss making companies can still benefit from RDEC through a net of tax cash credit.
How is R&D Tax Credit treated in your Accounts?
The position for companies claiming under the RDEC scheme is slightly different to those claiming under the SME scheme. As a result, the income is taxable; therefore, any RDEC acts as payment against the tax bill rather than reducing it.
Fiscale’s Step-by-Step guide to R&D Tax Credit claims
When working with Fiscale, we make the process of claiming SME R&D Tax Credit as simple and painless as possible.
Assessment
We establish if the research and development that you are undertaking, meets the criteria as set out by HMRC. This is usually done over the telephone, followed by a face-to-face meeting. This is to ensure that you are eligible and if so, we will then start the claims process.Technical meeting
Following the initial meeting to establish eligibility, we will then arrange a follow up to get to know (and understand) the work that you are undertaking. Typically, this meeting takes two hours and involves going though potentially qualifying projects in detail. At this meeting we will talk to the members of your team who are involved in the R&D, along with your financial team. We will also outline what is involved in processing a claim and the level of input required by your team.Draft report
As a result of the in depth technical meeting, we are then able to draft a report that is based on our discussions and all of the information that you have provided. We will be looking at every angle of your R&D, to ensure that we maximise the value of your claim.Submission
Once the report has been agreed by you, we then submit it to HMRC and deal directly with them on your behalf. You have the peace of mind that the report will be an accurate representation of your activities. We will also ensure that it is presented in a way that meets the requirements of HMRC.Review
Once the claim has been made, we will review your systems to help identify any areas of record keeping to support future claims. As a result, all future claims can be streamlined, making the process more straightforward.
Benefits of Working with Fiscale
- Senior management team have over 80 years of hands on experience of running and managing a diverse range of businesses
- Highly skilled team of research and development tax experts, including five Chartered Tax Advisors with over 90 years of experience in advising UK companies on all areas of Corporation Tax.
- 100% focus on R&D tax incentives, we work exclusively in this specialist area of tax
- £100,000 investment in bespoke systems to manage the claims process and enhance the client experience
- Established relationships with HMRC R&D Specialist units
- 100% success rate with submission of R&D tax credits
- You will receive regular progress reports to ensure you are fully aware of the status of your claim
- Nominated account manager – one point of contact
- 100% of our clients would recommend Fiscale and 100% of clients would continue to work with Fiscale.
Call Fiscale Today!
Why not contact us today to discuss your business’ R&D tax relief? It only takes our team around 20 minutes to determine if you are eligible or not.