Browse Article

Can Research and Development tax credit be claimed by loss making companies as well?

September 26, 2016 | Author: | Posted in Taxes

Want to reduce your company’s tax bill? If you are working on the R&D activities, you can legally do so, because the government of UK has come up with schemes to encourage such activities.

Once such scheme is the Research and Development tax credit.

Projects that qualify for this scheme include :

o  Projects that are purely technological and scientific in nature.

o  Projects that are helping the large masses of the population. The projects that move from the state of experiments to observation, analysis and then some end result which is deduced out of these research activities.

o  The company must own the Intellectual property (if any) that comes out of this research activity.

However, if you want your activities to qualify as R&D, then if must meet the above set definitions which are set out by the Department of Business, Innovation and Skills.

With the help of this scheme, you can then claim for all your R&D activities. You can claim for the following costs :

o  Employee costs : You need to mention the name of the employee and how the contribution is important for this research. If your employee is only partly involved in the research activity, you can still go ahead and claim for the cost, on the proportional cost basis.

o  Staff provider : If you have taken help of the staff providers, you can claim for the same. However, you can claim for only the staffs who are directly and fully involved in your research activities.

o  Materials : All consumable materials can be directly claimed with the help of this scheme. However, telecommunication and data charges do not come under this and cannot be claimed. Utilities like power, water, fuel etc. can also be claimed provided you use it only for R&D activities.

o  Software’s : You might be using software and licensed versions of the software for your research activities. Not all of them can be claimed. You need to prove that the software is used only for R&D activities. Then you can claim this too.

o  Sub-contractors : there are special rules applicable to claim the costs that your company incurs on sub-contractors. This rule is applicable to SME and large companies in different fashions.

o  Capital expenditure : Even though the Research and Development tax credit is for revenue expenditure only, your day to day transactions which fall under capital expenditure can also be claimed. HMRC (Her Majesty’s Revenue and Customs) defines certain rules on claiming for the capital expenditure.

When to claim?

The R&D tax relief needs to be claimed along with your CT (Corporate Taxes). You need to file for the same along with a technical write-up to the HMRC to prove your research activities.  It is also good to produce the summary of all the costs incurred by your company during this tenure. The exact time limit for making the Research and Development tax credit claim is 2 years after the end of the relevant CT accounting period.



Swanson Reed, UK’s leading specialist in Research and Development (R&D) tax relief advisors that helps start-ups, small & mid-sized businesses and large innovation companies claim Research and Development tax credits and incentives by the HMRC. To learn more about us, visit Swansonreed.Co.UK/What-we-do.

Article Source


I'm an freelance copywriter and I write on a variety of topics.

This author has published 6 articles so far.