Under the large company scheme (companies with over 500 employees) where the company gets a tax deduction for 130% of the costs (so an extra 30% of tax relief).
Under the SME scheme (companies with under 500 employees) where the company gets a tax deduction for 175% of the costs. Under the SME scheme, the company (if loss-making) may be able to get a cash refund of 24% of the costs (there are other restrictions on this cash refund as well).
The key rules are that the company must spend at least £10,000 on R&D. An R&D project must seek to achieve and advance in science or technology and directly contribute to this through the resolution of scientific or technological uncertainty. This does not have to be something completely new, but can be an appreciable improvement to an existing process, material, product or service. It must however be an increase in overall knowledge not just the companies own knowledge.
The key costs which can be claimed under the scheme are staff costs, sub-contract costs, direct material costs, fuel and power costs.
This is a complex area, but there will definitely be cases where companies may have activities which potentially fall within the definitions of R&D but they do not consider the possibility of a claim. In some cases, their accountants may not have been given or perhaps asked for sufficient detailed knowledge of the company’s activities – they do not therefore highlight the opportunity either. If you do any development work on products, software, production processes, you should always discuss this with your accountant to see if a claim is possible.
