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How to claim R&D Tax Credits for your business in 2023? - F6S |Experts in R&D Tax Credit Claims - R&D F6S Services
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Identify the projects that qualify for R&D tax credits claims. 2. Check which scheme your company qualifies for (SME scheme or RDEC). 3. Identify the costs that are eligible as R&D expenditure" name="description"/><meta content="How to claim R&D Tax Credits for your business in 2023? - F6S |Experts in R&D Tax Credit Claims - R&D F6S Services" property="og:title"/><meta content="How to claim R&D Tax Credits for your projects? 1. Identify the projects that qualify for R&D tax credits claims. 2. Check which scheme your company qualifies for (SME scheme or RDEC). 3. Identify the costs that are eligible as R&D expenditure" property="og:description"/><meta content="How to claim R&D Tax Credits for your business in 2023? - F6S |Experts in R&D Tax Credit Claims - R&D F6S Services" property="twitter:title"/><meta content="How to claim R&D Tax Credits for your projects? 1. Identify the projects that qualify for R&D tax credits claims. 2. 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href="https://www.f6s.com/rd-tax/blog/4-reasons-hmrc-might-reject-your-rd-tax-relief-claim" class="symbol-navlink-drawer w-inline-block">Why HMRC might reject your claim</a><a href="https://www.f6s.com/rd-tax/blog/6-reasons-why-rd-is-so-beneficial-for-smes" class="symbol-navlink-drawer w-inline-block">Why R&D credits are beneficials to SMEs</a><a href="https://www.f6s.com/the-top-8-things-smes-misunderstand-about-r-d-tax-credits" class="symbol-navlink-drawer w-inline-block">Top misunderstandings about R&D credits</a><a href="https://www.f6s.com/rd-tax/sectors/software-development" class="symbol-navlink-drawer w-inline-block">R&D for Software Development</a><a href="https://www.f6s.com/rd-tax/sectors/manufacturing" class="symbol-navlink-drawer w-inline-block">R&D for Manufacturing</a><a href="https://www.f6s.com/rd-tax/sectors/food-and-beverage" class="symbol-navlink-drawer w-inline-block">R&D for Food and Beverage</a><a href="https://www.f6s.com/rd-tax/sectors/admin-and-support" class="symbol-navlink-drawer w-inline-block">R&D for Administrative & Support Services</a><a href="https://www.f6s.com/rd-tax-credits-consultants" class="symbol-navlink-drawer w-inline-block">Who we are</a></div></div></div></div><div class="fullwidth-h1"><h1 class="symbol-h1">How to claim R&D Tax Credits for your business?</h1></div><div id="what" class="fullwidth-richtext"><div class="symbol-richtext-18 w-richtext"><h2>R&D Tax Credits in a nutshell</h2><p>In order to advance the knowledge of a particular field, product or service an organisation may apply resources to overcome barriers and to further the knowledge in those areas. HMRC allows the organisation to offset the cost of these resources against profits the organisation makes.</p><p>100% of the cost naturally is applied to the Profit and loss account. HMRC then allows a further 130% of the cost to be applied as Tax Credit to the net profit itself. This gives the organisation 230% value of the R&D cost. The additional 130% is known as the <a href="https://www.f6s.com/rd-tax-credits-explained" target="_blank">R&D Tax credit claim</a>.</p><p>The scheme is flexible enough to provide the firm with 3 options</p><ul role="list"><li>Offset all the R&D Tax Credit claim in the same year against net profits, if it can</li><li>Carry forward up 2 years from the accountancy period it relates to</li><li>Receive the portion of <a href="https://www.f6s.com/rd-tax-credits-calculator" target="_blank">R&D Tax Credit</a> not offset as a cash payment by HMRC at a rate of 14.5%.</li></ul><p></p><h2>Who can claim R&D Tax Credits?</h2><ul role="list"><li>SMEs (Small, Medium sized Enterprises) with fewer than 500 staff (this could be affected by subsidiary ownership), and</li><li>Have a turnover of less than €100 million and less than €86 million on the balance sheet</li></ul><p>For organisations that exceed this criteria they would refer to the <strong>Research and Development Expenditure Credit (RDEC)</strong>. More on that later.</p></div></div><div class="symbol-cta-container"><div class="symbol-cta-box"><div class="symbol-cta-title">Get a free consultation from F6S on your R&D claim</div><div class="symbol-cta-button"><div class="h21 leadbluefont"><a href="tel:+447401295965">0740 1295965</a></div></div><div class="symbol-cta-button"><div class="h21 leadbluefont"><a href="mailto:cashback@f6s.com?subject=Re%3A%20Free%20R%26D%20Tax%20Credits%20consultation">cashback@f6s.com</a></div></div></div></div><div id="what" class="fullwidth-richtext"><div class="symbol-richtext-18 w-richtext"><h2>What is the definition of R&D?</h2><p>Now before you start wondering if your 15 minutes spent in Tesco to work out the best value for money ‘meal deal’ can be classed as Research and Development HMRC has laid out the criteria which are</p><ul role="list"><li>The R&D must be seeking and advancement in science and technology</li><li>There was an uncertainty to overcome</li><li>An attempt was made to overcome the uncertainty</li><li>Could not be easily overcome by a professional in the field</li></ul><p>So maybe the pursuant of the optimum Meal Deal may just fall a shade outside of this definition. It is further complicated by the fact the organisation has to provide details of the project to HMRC.</p><p></p><h2>What are the costs that can be attributed to R&D?</h2><p>In general any costs, direct or indirect, that are associated with the R&D project can be deducted in full as part of the R&D Tax Credit claim. These can take the form of technical labour, HR and Finance support, management, materials, premises and consumables etc. The following is a caveat:</p><ul role="list"><li>Capital costs cannot be claimed</li><li>Subcontractor costs can only be valued at 65%</li></ul><p></p><h2>How to claim R&D Tax Credits?</h2><p></p><h3>Scenario 1. A company that has made a profit in the year</h3><p>AlphaCo has worked out its R&D expenditure to be £52,000 for the year. Net profits turned out to be £140,000. In AlphaCo’s trading scenario the £140,000 profit is reduced by offsetting all of the £67,600 R&D Tax Credit. There is no unutilised R&D Tax Credit.</p><figure class="w-richtext-align-center w-richtext-figure-type-image"><div><img src="https://cdn.prod.website-files.com/5bf8086dc176116541ad2553/63a2fa12d3a2898ee845f47e_Alphaco%20Net%20Profit%20is%20%C2%A3140%2C000%20for%20the%20current%20year.jpg" loading="lazy" alt="AlphaCo - R&D Tax Credits Claim"/></div></figure><p></p><h3>Scenario 2: A company could not claim the entire R&D Tax Credit</h3><p>BetaCo had R&D expenditure of £75,000. Net profit for the year was £26,000. In Betaco’s case the R&D Tax credit was way more than than the Net Profit so they couldn’t utilise it all. The balance unutilised was £71,500 which could be carried forward or received as a cash payment. This would also be the case if there was a loss in the year. This loss would be surrendered up to the value of the R&D Tax Credit.</p><figure class="w-richtext-align-center w-richtext-figure-type-image"><div><img src="https://cdn.prod.website-files.com/5bf8086dc176116541ad2553/639c2498aec4fda9d7f41d1f_BetaCo.jpeg" loading="lazy" alt="AlphaCo - R&D Tax Credits Claim"/></div></figure><p>If Corporation Tax is 19% (as at 2022) then on the surface it would seem more sense to offset all R&D Tax credits against net profits, even if it means offsetting against future years as the cash value of the R&D Tax credit is only 14.5%. However the following must be considered:</p><ul role="list"><li>The future is uncertain. Cash now is real money in the pocket rather than living in hope the Tax Credit can be claimed against future profits. A bird in the hand.</li><li>A firm’s need for cash could be urgent and the money would be handy</li><li>The cash settlement of the R&D Tax Credit would hold a greater current value as the reinvestment of that money may yield a better future income</li></ul><p>R&D Tax Credits do require the same diligence as any expenditure in the organisation to ensure maximum benefit is gained. It is not too dissimilar to Capital Allowances but with a more generous allowance, albeit for a shorter time period.</p><p></p><h2>Research and Development Expenditure Credit (RDEC)</h2><p><a href="https://www.f6s.com/rd-tax" target="_blank">R&D Tax Credits</a> can only be given to SMEs. The turnover threshold is €100 million. For firms that exceed these thresholds there is the provision of the RDEC.</p><p>RDEC is actual income at 13% of the R&D costs. It is paid by HMRC net of corporation tax. It can be used to offset any tax liabilities in the year, or for 2 years in the future.</p><p>Generally the R&D costs, definitions and restrictions still apply the same way as it would for R&D Tax credits. RDEC replaced the Large Company Scheme in 2016.</p><p></p><h3>An example: CharliCo</h3><p>CharliCo worked out its qualifiable R&D expenditure to be £45,000. Net profits were £70,000.</p><figure class="w-richtext-align-center w-richtext-figure-type-image"><div><img src="https://cdn.prod.website-files.com/5bf8086dc176116541ad2553/63a2faba5f306e07ed9a88f6_Charlico.jpeg" loading="lazy" alt="CharliCo - R&D Tax Credits Claim"/></div></figure><p>The value of RDEC in reality is 10.5% after the deduction of corporation tax. However, if a firm was unable to claim the entirety of the RDEC claim against profits then a cash settlement will be received.</p><p></p><h2>Conclusion</h2><p>The working principles differ for R&D Tax Credits and the R&D Expenditure credit.</p><ul role="list"><li>R&D Tax Credits are utilised at full value to offset net profits</li><li>RDEC are treated as income and can be used to offset the Corporation Tax liability</li></ul><p>Definitions can sometimes be vague and HMRC will want to have the liberty to scrutinise the R&D projects a firm is claiming.</p><p>Company Tax Return form CT600 is used for the R&D Tax Credit claim and RDEC.</p><p>There are specialists in the field who take care of all this for you. Any firm which is looking to start an enterprise in a sector full of challenges and uncertainties will want to utilise R&D Tax credits as much as possible. My expenses for R&D into the ultimate sticky toffee pudding have been kept safe!</p></div></div><div class="symbol-cta-container"><div class="symbol-cta-box"><div class="symbol-cta-title">Get a free consultation from F6S on your R&D claim</div><div class="symbol-cta-button"><div class="h21 leadbluefont"><a href="tel:+447401295965">0740 1295965</a></div></div><div class="symbol-cta-button"><div class="h21 leadbluefont"><a href="mailto:cashback@f6s.com?subject=Re%3A%20Free%20R%26D%20Tax%20Credits%20consultation">cashback@f6s.com</a></div></div></div></div><div id="what" class="fullwidth-richtext"><div class="symbol-richtext-18 w-richtext"><h2>FAQs</h2><h3>How much R&D cash can I get back?<br/></h3><p>If you are losing money, you can claim back up to 33% of your qualifying development spend in cash as SME R&D tax credit. In other words, you can get up to 33p back for every £1 you spend. If you are profit-making, your relief will offset your tax liability up to the amount of tax you owe. A profit making company, startup or SME can even get cash back if its Research and Development Tax Credit is greater than your corporation tax liability. In that case, you get the amount you're owed in R&D tax relief that is greater than your tax liability back in cash. You can get cash back as well if you've already paid your corporation tax - often the case when we are filing an amended corporation tax return to cover R&D expenditure in the R&D Claim for your past financial years.</p><p><br/></p><h3>What kind of innovations qualify for R&D tax benefit?<br/></h3><p>You need to create an ‘advancement in science or technology through scientific or technological uncertainty'. Each company, startup and SME is different, but HMRC likes to see technology built from scratch or third party technology that has been adapted so it functions better. This 'advancement' should also be challenging to build. If you've managed to solve your problem with little thought or in a few days it most likely won't qualify. Once you have identified this 'advancement' you can qualify costs from the whole project.</p><p><br/></p><h3>How long does the R&D tax credit process take?<br/></h3><p>We process your claim promptly after finalizing your documentation. HMRC generally takes four to six weeks to process a claim. We check in regularly with HMRC to ensure that your claim is progressing and to respond quickly to any questions about your HMRC R&D tax credits. We will also prioritise your claim if you have a deadline or other need.</p><p><br/></p><h3>How do I get my R&D money?<br/></h3><p>We will submit your company's corporation tax return including the tax credit you're looking to receive. We will attach a report to your corporation tax return explaining to HMRC how you are creating your 'advancement in science and technology'. We will also calculate your qualifying R&D expenses, your R&D tax credit value, and build a technical report to show HMRC why you deserve the relief.</p><p><br/></p><h3>How long does the R&D tax credit process take?<br/></h3><p>We process your claim promptly after finalizing your documentation. HMRC generally takes four to six weeks to process a claim. We check in regularly with HMRC to ensure that your claim is progressing and to respond quickly to any questions about your HMRC R&D tax credits. We will also prioritise your claim if you have a deadline or other need.</p><p><br/></p><h3>Can I claim credits for R&D if my research is subcontracted?<br/></h3><p>Yes, you can claim in many cases for what you spend on contractors, even if they're outside the United Kingdom. We are even often successful in increasing the amount our clients get by 'connecting' the subcontracts, if possible under HMRC regulations.</p><p><br/></p><h3>How long will it take to get the R&D tax credits?<br/></h3><p>We work hard to make sure that your R&D tax Credit is approved quickly and without issues. HMRC publishes guidance for the amount of time it will take to approve your credit, but it can be faster or slower. In January 2021, we were getting money for most of our clients within 30 days of submission, however the average time to approval by HMRC has considerably increased as of July 2022.</p><p></p><p><strong>Contributor: Makbul Patel</strong></p></div></div><div class="symbol-cta-container"><div class="symbol-cta-box"><div class="symbol-cta-title">Get a free consultation from F6S on your R&D claim</div><div class="symbol-cta-button"><div class="h21 leadbluefont"><a href="tel:+447401295965">0740 1295965</a></div></div><div class="symbol-cta-button"><div class="h21 leadbluefont"><a href="mailto:cashback@f6s.com?subject=Re%3A%20Free%20R%26D%20Tax%20Credits%20consultation">cashback@f6s.com</a></div></div></div></div><div id="what" class="symbol-breadcrumbs"><div class="symbol-breadcrumbs-container w-container"><a href="https://www.f6s.com" class="symbol-breadcrumblink">Home</a><div class="symbol-breadcrumbarrow">></div><a href="https://www.f6s.com/services" class="symbol-breadcrumblink">Services</a><div class="symbol-breadcrumbarrow">></div><a href="https://www.f6s.com/rd-tax-credits-explained" class="symbol-breadcrumblink">R&D Tax Credits</a><div class="symbol-breadcrumbarrow">></div><div class="symbol-breadcrumblink">How to claim R&D Tax Credits?</div></div></div><footer bind="75c7583f-6f03-d9f5-19ec-0b9fc0d58fbf" class="symbol-footercontainer"><div class="symbol-footerlinks"><div class="symbol-footerlinkcolumn"><div class="symbol-footercolumnheading">R&D Tax Credits</div><a href="https://www.f6s.com/rd-tax-credits-explained" class="symbol-footerlink">R&D Tax Credits Explained</a><a href="https://www.f6s.com/rd-tax-credits-consultants" class="symbol-footerlink">R&D Tax Credits Consultants</a><a href="https://www.f6s.com/rd-tax/faqs" class="symbol-footerlink">R&D Tax Credits FAQs</a></div><div class="symbol-footerlinkcolumn"><div class="symbol-footercolumnheading">SEIS & EIS Tax Relief</div><a href="https://www.f6s.com/eis-scheme-explained" class="symbol-footerlink">EIS Scheme</a><a href="https://www.f6s.com/seis-scheme-explained" class="symbol-footerlink">SEIS Scheme</a><a href="https://www.f6s.com/seis-eis-scheme-for-uk-startups" class="symbol-footerlink">SEIS vs EIS<br/></a></div><div class="symbol-footerlinkcolumn"><div class="symbol-footercolumnheading">SR&ED Tax Credits</div><a href="https://sred.f6s.ca" class="symbol-footerlink">SR&ED Tax Credits Explained</a><a href="https://sred.f6s.ca/sred-calculator" class="symbol-footerlink">SR&ED Calculator</a><a href="https://sred.f6s.ca/sred-consultant" class="symbol-footerlink">SR&ED Consultants</a><a href="https://sred.f6s.ca/faq" class="symbol-footerlink">SR&ED FAQs</a></div><div class="symbol-footerlinkcolumn"><div class="symbol-footercolumnheading">About</div><a href="https://www.f6s.com/f6s" class="symbol-footerlink">About F6S</a><a href="https://www.f6s.com/iot" class="symbol-footerlink">Internet of Things</a><a href="https://www.f6s.com/directory/people" class="symbol-footerlink">Community</a></div></div><div class="symbol-privacylinks"><div class="symbol-privacylinks-links"><a href="https://www.f6s.com/terms" class="symbol-privacy-link">Terms</a><a href="https://www.f6s.com/privacy-policy" class="symbol-privacy-link">Privacy</a><a href="https://www.f6s.com/data-security" class="symbol-privacy-link">Data Security</a><a href="https://www.f6s.com/cookie-policy" class="symbol-privacy-link">Cookie Policy</a><a href="https://www.f6s.com/cookie-table" class="symbol-privacy-link">Cookie Table</a></div><p class="symbol-privacylinks-copyright">©2024 F6S Network Limited. 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