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R&D Tax Relief Eligibility Questionnaire

This checklist will help you ascertain whether your project could be eligible for an R & D Tax Credit claim. If you can answer Yes to all of the questions below, then we are confident that you would be eligible.

What is R&D Tax Relief?
Introduced by the UK Government in 2000, the R&D tax relief scheme is designed to encourage innovation and global competitiveness by allowing companies to reclaim some of the money invested in qualifying research and development.
What constitutes R&D for tax purposes?
What constitutes R&D for most people may be very different from HMRC’s interpretation. According to HMRC, a company is undertaking R&D when they are 1) overcoming technological uncertainties aimed at, 2) achieving an advance in technology and 3) which isn’t readily deducible by a competent professional.
What are the tax benefits of an R&D claim?
The effect of an R&D tax claim is to reduce taxable profits or increase taxable losses. The claim can reduce profits, reduce profits and create a loss, or increase pre-tax losses. There are three main types of tax benefit that arise from a successful claim for R&D Tax Relief – these are 1) a payable cash credit, 2) a rebate of corporation tax and 3) an enhanced deduction that can be carried forward.
How far back can I claim R&D tax relief?
You can go back two full financial years (that’s your company’s financial year, not ‘tax’ years).
Can I still claim for R&D tax relief if my project wasn’t successful?
This is irrelevant for the purposes of the scheme – it’s the R&D activity that’s important, not the outcome of the project.
How does sub-contracting affect an R&D Tax relief claim?
Subcontracting can be a tricky situation in an R&D tax credit claim, but it doesn’t necessarily mean you can’t claim. You need to be very sure about your contractual situation, the work you are contracted to do and who is bearing the brunt of the cost, as all these can have an effect on the eligibility of subcontracted work.
What percentage of sub-contractor payments can be claimed?
Under the SME scheme, 65% of payments to sub-contractors can be claimed except if the SME is connected to the sub-contractor (e.g. is its parent, part of the same group, or are under common control). The rules are different for connected sub-contractors.
Does the sub-contractor have to be based in the UK?
No. There is no requirement that the sub-contractor should be in the UK. However, it is important that the sub-contractor is engaged to perform a specific task rather than providing a service.
If I process an R&D tax claim on my own, will this annoy HMRC?
No. This is a Government scheme fully supported by the Treasury and HMRC. In fact HMRC recently announced a number of measures to make the scheme easier to access.
What happens if HMRC investigate an R&D tax claim?
Although the majority of claims will be processed by HMRC without the need for further information, some are not so fortunate. This process is called an enquiry and can happen because: HMRC are looking at other tax issues related to your business, and your R&D claim will be included.
  • You’ve claimed before, but this claim is much larger.
  • Your technical justification is insufficient, or not compelling.
  • Your claim focusses on a technology which HMRC are seeing more often – and they want to ensure a consistent approach.
HMRC might have a simple question, or could ask for emails, spreadsheets, invoices, contracts and other correspondence.
Are R&D tax relief schemes considered tax avoidance?
Do grants affect my R&D tax claim?
Grants and subsidies can move a portion (or all) of an SME’s project from the SME scheme to the RDEC scheme. It is therefore possible – and relatively common – for SMEs to be able to claim under both schemes for one or more projects. As a rough rule of thumb – If an SME gets a grant or subsidy that is State Aid, that project’s claim may have to go through the RDEC scheme. If an SME gets a grant or subsidy that is not State Aid, its claim can be split between the SME and RDEC schemes. Large Companies are not affected by grants and subsidies.
Are R&D tax relief schemes considered tax avoidance?
No. This is a Government scheme fully supported by the Treasury and HMRC. It has been in operation since 2000.
Can I claim for R&D even though I’m making a loss?
Yes. The crucial thing is that companies have to be spending money, and the more they have spent on eligible activities, the greater the benefit and some loss-making companies may be eligible to receive a cash credit.
Can all types of company claim R&D tax credits?
Only Limited Companies can claim because they pay corporation tax. Partnerships, Charities and Sole Traders cannot claim.