R&D Tax Credits cover a broad range of businesses, activities, and industries and you don’t need to work within specialist fields – so long as the investment seeks to overcome uncertainty or a technological problem, then a business may qualify. Utilising the government’s R&D tax incentive can help you innovate your business and take new steps towards achieving its goals.
What is R&D Tax Relief?
R&D Tax Relief is a government incentive, which aims to support British businesses that are undertaking technically challenging work, to create jobs in the UK, attract foreign direct investment and encourage a culture of innovation. Since its introduction back in 2000, the R&D Tax Relief scheme has expanded to help a wide variety of sectors, from software and technology to agriculture and construction.
The R&D Tax Relief is broken up into two schemes:
SME R&D Tax Relief which provides reimbursement for up to a third of development costs for micro, small, and medium-sized companies. The other scheme is the Research and Development Expenditure Credit (RDEC) which supports larger businesses with a 13% tax reimbursement.
Who qualifies for R&D Tax credits in software and tech development?
Your business needs to meet three criteria to qualify:
- Attempts to achieve scientific or technological advancement
- Attempts to overcome scientific or technological uncertainty
- Systematic approach to R&D activities
What expenditure can be claimed under the R&D Tax Credits scheme?
You can claim many areas of expenditure as part of an R&D project. We’ve listed out the cost categories below:
- Staffing Costs
- Subcontractors
- Consumables – e.g. wasted materials, scrapped tooling, prototypes, etc.
- Externally Provided Workers (agency staff)
- Software Licenses – e.g. CAD tools, BIM, etc.
Let’s look at some examples:
AI
- Development of improved machine learning algorithms balancing algorithmic accuracy and computational efficiency
- Development of improved natural language processing and sentiment analysis techniques
- Development of improved data modelling and data engineering methodologies to improve speed and accuracy within data projects
Cyber Security
- Development of new two factor authentication tools integrated within microservice based architectures
- Development of decentralised blockchain applications with enhanced cyber security and cryptography
Back-end Development
- Development of self-healing, autoscaling back-end database systems with improved efficiency
- Development of complex microservice based architectures integrating legacy systems with novel APIs and applications
Where do RCK come in?
Step 1. We’ll set up an introductory call
We start with an initial call. A company’s eligibility for R&D Tax Credits needs to be established in the initial phases of the claiming phase. This is done through obtaining background information on the company in question and outlining how their specific R&D process works.
Step 2. The technical information
The second step of our process for claiming R&D Tax Relief is outlining all the projects that are set to be included in the R&D claim.
Step 3. Costing
Finally, our consultants work with clients to then prepare and co-populate cost collection documentation, detailing relevant project costs and to formalise an R&D apportionment methodology consistent with those verified by HMRC as preferred methods.
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