How to calculate how much your R&D tax credit claim is worth
4 min read
01 July 2019
British companies who pay UK corporation tax and whose work involves research and development can claim some of their tax back under the R&D tax credits scheme.
If you work in medical, scientific or technological research, the Government is open to giving you some money. Potentially quite a lot of money, in fact. But why?
The Government cares about tech and science – is that you?
Research and innovation are extremely important to society; they’re also arduous and financially risky, so the scheme exists to help make it possible for companies to continue pursuing such activities.
How much money can you claim back?
But the really important question is, how much money are you likely to be able to claim back? This will depend on a variety of factors, such as the size of your company and its tax rate. But to help you get a bit of an idea, here are the main things you can claim for:
1. Staff costs: You can claim a proportion of the salaries, national insurance contributions, pension contributions and expenses of staff who are directly working on your research and development project. This includes managers and support staff if they are doing work specifically related to the R&D activity.
2. Agency workers: If you use a recruitment agency to hire research and development staff, you can claim up to 65% of these costs.
3. Subcontractors: If you subcontract some of your research and development, how much of those costs you can claim back depends on the size of your company:
4. Materials and utilities: You can claim for materials you’ve used up in your research, and you can also claim a proportion of your water, gas and electricity.
5. Software: You can claim for some or all of the cost of software you buy to use in your research.
6. Clinical trial volunteers: You can claim some of the cost of paying clinical trial volunteers.
7. Prototypes: You can claim some of the design, construction and testing costs for prototypes. Selling the prototype will reduce what you can claim.
What can small companies claim?
Small companies can usually claim back up to 65% of subcontracted costs. A small company has fewer than 500 staff and either a turnover of less than €100m or a balance sheet total of less than €86m. Any company bigger than this is classed as a large company for the purpose of the scheme.
What can large companies claim?
A large company can only claim for subcontracted costs if the work is subcontracted to a charity, higher education institute, scientific research organisation, health service body or individual or partnership of individuals (so not a corporation).
You can’t claim for:
- the production and distribution of goods and services
- capital costs
- buying land
- the cost of patents and trademarks
- rent or rates
- employment-related benefits
Am I eligible if my company makes a loss?
If your business is loss-making, you might be able to claim a greater proportion of your costs than if you made a profit! Profitable small companies can expect to get around 25% of their costs back; loss-making small companies can receive up to a third back.
Large companies, both profit and loss-making, can recoup up to 9.7% of their costs. Still unsure? Then have a look at this handy R&D tax credit calculator to see how much you could be eligible for.