Heydon Innovation LLP
is a firm of Chartered
Tax Advisers

Advisor in Residence
SETsquared Exeter


Heydon Innovation LLP
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R&D TAX RELIEF

Research & Development (R&D) tax relief can be transformative to a company’s finances, creating new and exciting opportunities for its shareholders and Directors.

An SME that has incurred £150,000 of qualifying R&D expenditure could receive a £50,000 cash payment within 28 days.

When a tax relief is this valuable, it is important that every innovative company thoroughly assesses whether it is eligible.

Can my company claim?

All companies liable to UK corporation tax may be eligible to claim R&D tax relief.

The company needs to have undertaken qualifying R&D activities and incurred qualifying R&D expenditure relating to those activities.

From software development to manufacturing. Rocket science to construction. Food and drink to engineering. R&D is present in most sectors.

Broadly speaking, if your company is working on developing new products, processes or systems, it is likely to qualify.

There are two schemes that companies can claim under:

Is my company an SME or large company?

In simple terms, you are an SME if you have:

  1. Staff headcount of less than 500; and
  2. Turnover of no more than €100M, or, Balance Sheet assets of no more than €86M.

There are complexities surrounding groups and transitional years.

HMRC has identified incorrect assessment of SME status as one of the most common errors within R&D claims. We strongly recommend seeking professional and experienced advice if your company’s SME status is in any way unclear.

Any eligible company not fitting the definition of an SME will need to claim under the RDEC scheme. In some circumstances, SMEs that have received grant income, or, have undertaken subcontracted R&D will also need to claim under the RDEC scheme.

Qualifying activities

The definition of R&D for tax purpose is set out in a Government document, known as the BIS Guidelines.

In simple terms, R&D takes place when:

  • a project seeks to achieve an advance in science or technology, and
  • the project attempts to resolve scientific and/or technological uncertainty.

If your company is undertaking any projects that are using science or technology in new or unusual ways, or, if you are unsure how to achieve the aims of the project(s) at the outset, you are likely to be undertaking R&D.

Unsuccessful projects can also qualify for R&D tax relief.

Qualifying expenditure

The main types of qualifying R&D expenditure are:

  • Staff costs (salaries, employer’s NIC, employer pension contributions and reimbursed expenses).
  • Externally provided worker (e.g. agency staff) costs.
  • Subcontractor costs.
  • Software costs.
  • Materials and consumables.

Tax legislation clearly defines qualifying expenditure. However, there is still some ambiguity over how best to link the qualifying expenditure to the qualifying activities. This requires a clear, logical and data driven methodology.

The same methodology is not appropriate for all companies.

Let us help transform your business:

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Already Claiming?

The approach taken by advisers differs significantly. This affects the size and accuracy of a claim, along with the time investment required from you.

About Us

We are not what you would expect from 'typical' accountants or tax advisers. Our approach is to keep our ways of working flexible, to fit around our clients.

Heydon Insights

If you are already claiming, we are happy to review your most recent claim for free. We may be able to increase the value and/or make the process easier for you.

Any company that uses science or technology to work on innovative projects should review whether it qualifies.

Your company does not need to be profit making to make an R&D claim. Loss-making SMEs receive a cash payment from HMRC.

Contact us to discuss your claim

We were delighted that Heydon Innovation was able to help us with our R&D tax credit claim. It was very important to us that the claim was considered in its completion. Heydon Innovation approached this both professionally, and most importantly with the highest standards of ethics.

Not only did I learn a great deal, but also the guidance and assistance I received, particularly in view of the tight timeline, was exactly the high standards that we always aim to deliver to our own clients.