R&D Tax Credits

What are R&D Tax Credits?

Research and Development Tax credits are a UK incentive designed to encourage companies to invest in R&D. Companies can reduce their tax bill or claim payable cash credits as a proportion of their R&D expenditure. Expenditure in innovation including process improvements can qualify where staff costs, consumables and many other company costs are accumulated as part of the overall claim.

Tax Credits Explained

Rewarding innovation and fuelling growth, R&D tax credits can transform your business. Research and development (R&D) tax credits are a government incentive designed to reward UK companies for investing in innovation. They are a valuable source of cash for businesses and the cash can be used in any way the business decides. Having the ability to make a claim every year can allow a business to invest in accelerating their R&D, hire new staff and ultimately grow their business to the next level.

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Qualifying for
R&D Tax Relief

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Who can qualify?

Any UK company that is limited and is subject to Corporation Tax payments.

R&D can take place in any sector. It occurs in everything from care homes, construction, pizza-making to chemical engineering, and digital development.

The scope for identifying R&D is huge – in fact, it exists in every single sector. And if you’re making a claim for the first time, you can typically claim R&D tax relief for your last two completed accounting periods.

Not sure if you qualify? Submit an eligibility enquiry or call 0141 739 3377

How do you qualify?

Companies that spend money developing new products, processes or services; or enhancing existing ones, are eligible for R&D tax relief. If you’re spending money on your innovation, you can make an R&D tax credit claim to receive either a cash payment and/or Corporation Tax reduction. Expenditure in innovation including process improvements can qualify where staff costs , materials, software and consumables as well as many other company costs can qualify as part of the overall claim. Claims go back 2 financial years and each year will provide a separate claim value.

Not sure if you qualify? Submit an eligibility enquiry or call 0141 739 3377

Next steps

One of our technical consultants will contact you to discuss the type of projects you have completed over the last 3 years. After a 45 minute meeting, the consultant will forward your project list to the office where experienced engineers dissect the projects into a range of innovative reports. Our engineers and accountants will then work together to create a quality innovation report with the relevant cost expenditure. The claim is then submitted to HMRC.

Submit an eligibility enquiry or call 0141 739 3377

R&D Projects

Lets look at a few projects where ZLX has submitted successful claims:

Piling Companies: Development of a software system to determine the exact length of a pile required on a building site without creating any waste

The waste generated from building sites is becoming a major issue for land fill sites. Therefore innovative piling companies are looking at ways of combining two technologies to assist them in the supply of exactly the right length of pile. Technology which can determine the position and depth of rocks and different grades of sub soil can then be used to determine a concrete or steel pile length before the site works begin. Through a lattice network of piles, the site can be marked out and the correct length of piles are then forced into the ground with no waste product.

Food Manufacturing: Research and Development of a plant extract in Bangladesh to create a range of innovative pre-packed food products

A local company has embarked on the development of unique Bangladesh goods which include the use of special spices, herbs, fish, meats and breads. Bangladesh has a range of plants “Rotala simpliciuscula (JSTOR)” whereby the company and their associated experts have extracted a unique herb and spice from the root. This spice has enabled the business to make a complete new range of products which are unique and innovative

Construction: The design and development of fireproof refuse containers and refuse chutes for high level tower blocks

With the problems associated with Grenfell Tower, many companies undertook investigation and subsequent design of fire safe equipment and materials.

The R&D activity in which this company undertook involves the design and development and testing of fireproof refuse containers and refuse chutes for high level tower blocks.

In recent years it has been discovered that many fires in tower blocks have been caused by residents unwittingly pouring chip fat down the chutes and causing fires within the chutes which due to the old design then spread throughout the block.

The task was to find a fireproof solution which would contain the fire and not allow smoke or flames to spread.

This involved finding a material that could be installed within the existing chutes over 24 floors of a tower block and which would expand with heat/fire and close of any gaps within the chute and at the same time smother the fire.

Telecommunications : The company was asked to provide a unique and innovative communications solution to a 12 site hotel group.

To comply with the customers requirements and to enable a 12 site project, the company embarked on developing and implementing an innovative communications platform that would deliver a unified solution across their estate.

The company first had to upgrade their old connectivity from legacy PSTN services to SIP technology (VOIP) utilising the Call Manager platform to present clients with front of house announcements routing to various departments within the hotels. Ultimately any missed calls would then bounce to the Head Office Call Centre where the calls would be booked in or transferred back to the hotels.

To enable this functionality the company had to design, test , integrate & implement 3 different technology platforms to deliver this solution, from the Cloud SIP, In-house PBX and ultimately reporting via 3rd party call management software. This solution has increased the call centre turnover at head office 3 fold.

HMRC Say

Here are some of the comments from our very own HMRC on Corporation Tax, R&D Tax Relief & The Patent Box

The Patent Box enables companies to apply a lower rate of Corporation Tax to profits earned after 1 April 2013 from its patented inventions. The relief will be phased in from 1 April 2013 and the lower rate of Corporation Tax to be applied will be 10%.

This guidance only refers to patents but your company may also benefit from the Patent Box if it holds certain other medicinal or botanic innovation rights.

SME R&D relief allows companies to:

Deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction.

Claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss

You can claim capital allowances on items that you keep to use in your business – these are known as ‘plant and machinery’.

In most cases you can deduct the full cost of these items from your profits before tax using annual investment allowance (AIA).

R&D % Claim

Here is a small section of what can be claimed in an average R&D project. The percentages are correct as of March 2019.

NB The figures below represent one particular project and are not representative of every project.

28%

Directors Costs

19%

Staff Costs

75%

Consultant Costs

48%

Subcontractors

12%

Consumables

27%

Travel

34%

Software

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