Limited companies can claim tax deductions on some of the costs incurred through research and development (R&D) projects, providing that they meet certain conditions. The relief can be as much as 225% of the qualifying costs for small companies, and since April 2012, there’s no minimum spend requirement.
When working out if you’re able to claim this relief against your project, you need to think of the following:
- your project must challenge what’s already known through scientific or technological discovery
- has anyone else already done it?
- if so, is their project and its findings public knowledge?
If it’s an original project, or someone else has kept their discoveries secret, then it’ll probably qualify as R&D. You do need to be careful that this project doesn’t become regular practice or production of a new product though!
Some projects are also eligible for government funding, but for small companies these can sometimes disqualify the project from the tax relief. Your company may still qualify for the deduction through the large company scheme, but the maximum relief available is 130%.
If your company shows any losses after the R&D reduction, you can get a refund from HMRC providing that you’re claiming the deduction through the small company scheme.
We can help you with any R&D queries and will be happy to discuss your projects with you. Please call us on 01782 279615.