R&D Tax Credits

The basic facts 

Research and Development (R&D) tax credits are a government-backed initiative designed to encourage innovation. We should stress that this is NOT aggressive tax planning but rather a claim to which eligible companies are entitled. R&D, for tax purposes, is defined as:

  • Seeking an advancement in science or technology (this does not need to be successful)
  • Undertaking activities which aim to achieve the advance by resolving scientific or technological uncertainties

In order to be eligible to make a claim, you must meet the following basic criteria:

  • You must be operating as a limited company
  • You must incur qualifying costs on an identifiable project
  • You must make the claim no later than two years from the end of the accounting period in which the expenditure is incurred

What are the main costs?

  • Gross salaries, employers’ NIC and employers’ pension contributions
  • Materials (subject to certain restrictions)
  • Subcontractors
  • Certain overheads