Heydon Innovation LLP
is a firm of Chartered
Tax Advisers

Advisor in Residence
SETsquared Exeter


Heydon Innovation LLP
Companies House No. OC426053
VAT Registration No. 315 9189 84

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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

HMRC’s most recent ‘R&D Tax Credit Statistics’ show that the average claim for an SME is over £50,000.

All sectors can qualify for R&D tax relief. From software development to manufacturing. Rocket science to construction. Food and drink to engineering.

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.

Contact us to discuss your claim

Heydon Innovation really knows its stuff! When we first met I wasn't aware of the type of work that would qualify for R&D tax credits, and I certainly didn't have the time to go through the claims process myself. They quickly identified our R&D spend that would qualify, then put together all the paperwork and dealt with the whole claims process from end to end. Such a great service, that we continue to use every year.