What are R&D Tax Credits?

R&D tax credits are a government tax incentive that rewards UK-based companies that have invested in innovation

No upfront fees

Rates as low as 3%

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R&D Tax credit In SHORT

How does claiming R&D tax credits work?

You spend money on innovation

  • Your company doesn't need to be paying UK corporation tax. As long as you are liable for UK corporation tax, we will support you regardless of the markets you serve, your company size and whether you make or lose money.
  • Your costs must run through your company and be incurred in a way that allow you to claim. We can help you sort this out easily and make sure you also structure yourself for maximum benefit.

You have to submit a claim to HMRC

  • First we help you identify the correct scheme for claiming your R&D tax credits. If you are a Small and Medium Enterprise (SME), the SME R&D Tax Credit Scheme applies to you. If you are a larger company or corporation, the Large Company Scheme or Research and Development Expenditure Credit (RDEC) Scheme are the way to get cash from R&D tax credits. There are cases, like some grants, when SMEs must claim under the Large Company Scheme. We are experts in this area and will help you understand how to maximize your claim.
  • We'll help you with a technical description on why your company's projects qualify for R&D tax credits. The technical description, or narrative, will show that you are creating an advance in science or technology in an environment of scientific or technological uncertainty.
  • We produce a breakdown of your R&D expenditures and calculate your total tax savings/credit on your spend - how much you'll get back from HMRC.
  • We submit it all to HMRC. We can go back several years to claim for money you've already spend on R&D or just claim for your current tax year. If we're claiming for past years, we'll file an amended corporation tax return that updates the original you filed.

How you get your cash back

  • An HMRC inspector will review your Corporation Tax return claim.
  • If you are an SME (see definition above), you can get back up to 33% of your R&D spend.
  • If you are a large corporation, we can get you up to 11% of your R&D spending back.
  • You'll usually receive the money in four to five weeks.
  • HMRC may have questions in which case they'll be in contact by phone or mail. This is commonly called a query - we are happy to assist with resolving any and all queries regardless of whether we helped you with your R&D claim originally.
R and D Tax Credits Explained

F6S has helped thousands of technology startups like you

Marco Iannone

"It was very easy to work with F6S, they made the process as painless as it can be, and enabled us to claim more than we hoped for."

Remus Cazacu

"It's a pleasure to work with the F6S team and I would highly recommend them to any tech startup."

Laurent Biancardini

"F6S were a great help with filing my EIS application. They took a lot of the hassle away and ensured it was completed correctly"

Alick Varma

"The F6S team have been great. They have helped us make the most of the R&D opportunities offered by the government in a quick, simple and super efficient manner. They found costs we didn't think we could claim and also worked with us throughout the financial year to structure our costs so we could claim more. That's why we've used them for the last three years on the trot."

Call 074 0129 5965 or email cashback@f6s.com

What are R&D tax credits worth to you?

SME/Startups

Small or medium enterprises can claim back up to 33% of your research and development expenditure in cash. The percentage you claim back can vary and depends on several factors. It's our job to get you as close to 33% as possible on your R&D claim. Here are some scenarios that will affect your claim:

  • Up to 33% repayment for loss making companies
  • Up to 26% repayment for profit making companies
  • Up to 18% repayment for companies breaking even

If you are a SME that has received a grant you may still be entitled to claim R&D tax credits. If you have received a grant that is considered State Aid (i.e. grants, subsidies, etc. from public bodies such as Innovate UK) then you can claim under the Large Company Scheme/RDEC where you get back up to 11%. If the grant is not considered State Aid you will be able to claim partly under the Large Company Scheme/RDEC and partly under the SME scheme. Your eligible amount will be how much you spent, less the amount of the grant itself. Many of the companies, startups and SMEs we help receive grants and we can give you a free orientation on how you can claim to receive the most amount back.

You are a SME/Startup that makes a profit
For example, if you made a profit of £600,000 in your last financial year and spent £350,000 on eligible research and development activities, we can get you up to £26,000 back.
Your profit
£300,000
Your Corporation Tax (20%)
£300,000 x 20% = £60,000
Your eligible R&D spend
£100,000
R&D enhancement
£100,000 × 130% = £130,000
Amended taxable profit
£300,000 - £130,000 = £170,000
Amended Corporation Tax (20%)
£170,000 × 20% = £34,000
We can get you back
up to £26,000
You are a SME/Startup that makes a loss
For example, if you're making a loss of £600,000 and spending £350,000 in eligible R&D activities, we can get you up to £33,350 back.
Your trading loss
£300,000
Your eligible R&D spend
£100,000
R&D enhancement
£100,000
Enhanced trading loss
£100,000 × 130% = £130,000
Repayable tax credit
£300,000 + £130,000 = £430,000
Amended Corporation Tax (20%)
£230,000 × 14.5% = £33,350
We can get you back
up to £33,350
You are a SME/Startup that has won a grant
As an example, you receive a grant for £80,000 and spend £100,000 in eligible R&D activities, you can claim tax relief using the SME scheme for £20,000 and the RDEC for £80,000.
Amount of grant received
£80,000
Your eligible R&D spend
£100,000
Amount eligible for SME
£100,000 - £80,000 = £20,000
Amount eligible for RDEC
£80,000

Large Companies

Large companies can claim R&D tax credits of up to 11% under the Large Company Scheme or RDEC. Basically, anyone that does not fall into the definition of a SME is considered a large company for the purpose of calculating how much you get back in R&D Tax Credits. Trading losses can be surrendered (i.e. not brought forward to reduce future taxable profits) for a tax credit equal to the 11% of the surrendered amount.

You are a large company that makes a profit
If you're making a profit of £1,000,000 and spending £500,000 in eligible research and development activities, we can get you up to £74,000 back.
Your profit
£1,000,000
Your Corporation Tax (20%)
£1,000,000 x 20% = £200,000
Your eligible R&D spend
£500,000
R&D Tax Credit (11%)
£500,000 × 11% = £55,000
Your enhanced profit
£1,000,000 + £55,000 = £1,055,000
Corporation Tax (20%)
£1,055,000 × 20% = £211,000
Revised tax payable
£211,000 - £55,000 = £156,000
We can get you back
up to £44,000
You are a large company that makes a loss
If you're making a loss of £2,000,000 and spending £2,500,000 in eligible R&D activities, we can get you up to £44,000 back
Your profit
£300,000
Your eligible R&D spend
£500,000
R&D Tax Credit (11%)
£500,000 × 11% = £55,000
Loss before tax
£355,000 - £500,000 = -£145,000
Corporation Tax (20%)
£355,000 × 20% = £71,000
R&D tax credit usable against tax
£55,000 - £11,000 = £44,000
We can get you back
up to £44,000

R&D Tax Credit Calculator

Are you an SME or large company?
I’m an SME
  • less than 500 staff
  • less than £100m turnover or £86m gross assets
I’m a large company
  • 500 staff or more
  • more than £100m turnover or £86m gross assets
I'm loss making
I'm profitable
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You could get up to

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cash or credit

F6S can help you with your tax credit claim

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R&D Tax Credit Eligibility

You get a Research and Development Tax Credit when your startup, company or SME is doing work that attempts to solve technical or scientific uncertainties and that work translates into an advance in the overall field. It's a highly specific standard and we can advise you quickly at no charge whether you qualify.

An advance in the overall field means that the project you want R&D Tax Credit for is creating new products, processes or services in any market or modifying existing ones.

There's an enormous amount of exciting work going on in technology in the United Kingdom, but the UK Government has a specific definition of what it considers research and development. Your project will not be automatically considered a scientific or technical advance just because it relies on science or technology. In order to qualify for government R&D tax relief, your project must also introduce new concepts and ideas into the field your company, startup or SME operates in.

Scale can be a relevant factor as well. Projects at larger scale will likely require new processes, techniques or technologies that would make them eligible for R&D tax credits.

There are many common misunderstanding we see about the R&D tax relief scheme. One misunderstanding is you have to be successful or profit making. There is no such requirement and the scheme recognizes that technical innovation is inherently risky. Many companies, startups and SMEs also come to us with questions about claiming R&D tax relief on work done for clients or as a subcontractor or contractor. In many cases we are able to get them a R&D tax credit for work done for others. Last, you can claim in many cases for what you spend on contractors, even if they're outside the United Kingdom.

Costs that qualify for R&D Tax Credits

If your R&D project qualifies, you can submit an R&D tax relief claim based on the following qualifying R&D expenditure:

Employee cost

Your cost of employing staff (how much you pay them) who are directly involved in research and development activities. You can also claim for a portion of director or employee time that is actively spent on R&D activities - it's not all or nothing. All directors and employees should be directly employed by the company under a contract of employment and paid through the payroll. Look down the page a bit for information on claiming for contractors and subcontractors.

Externally Provided Workers

Your costs of paying a staffing provider to supply external workers/staff directly engaged in research and development activities. Your spend must only be related to the provision of workers, so you can't claim when the contract regards additional tasks.

Materials

Your spend on actual physical materials or hardware that are consumed in activities directly related to R&D. This doesn't include materials that are used in products created for sale and doesn't include hardware that isn't consumed within the R&D process.

Trials volunteers payments

The cost of sourcing volunteers to take part in clinical trials that are needed for the R&D activities.

Utilities

Your cost for power, water and fuel used directly for carrying out R&D.

Software

Software you buy that is directly employed in your R&D activities.

Subcontractors

SMEs can qualify between 65% and/or 0%-100% of spend on R&D activities done by subcontractors. You can qualify anywhere between 0%-100% of the cost if the subcontractor is a connected party. A connected party is a subsidiary, parent company, a company with common directors, a relative, etc. Our specialists may be able to help you make a subcontractor connected and increase eligibility from 65% to 100%. Large companies are not able to claim on subcontracted expenditure but the company you are subcontracting too may be able to claim.

Capital Expenditure

Your expenditure on capital assets. You can claim expenditure of R&D as a capital allowance in some cases. Please reach out if you have doubts and we'll look at your specific case.

F6S can help with your R&D claim

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FAQs

How much cash can I get back?

If you are losing money, you can claim back up to 33% of your qualifying development spend in cash as SME R&D Tax Credit. In other words, you can get up to 33p back for every £1 you spend. If you are profit-making, your relief will offset your tax liability up to the amount of tax you owe. A profit making company, startup or SME can even get cash back if its Research and Development Tax Credit is greater than your corporation tax liability. In that case, you get the amount you're owed in R&D tax relief that is greater than your tax liability back in cash. You can get cash back as well if you've already paid your corporation tax - often the case when we are filing an amended corporation tax return to cover R&D expenditure in the R&D Claim for your past financial years.

What kind of innovations qualify for R&D Tax Benefit?

You need to create an ‘advancement in science or technology through scientific or technological uncertainty'. Each company, startup and SME is different, but HMRC likes to see technology built from scratch or third party technology that has been adapted so it functions better. This 'advancement' should also be challenging to build. If you've managed to solve your problem with little thought or in a few days it most likely won't qualify. Once you have identified this 'advancement' you can qualify costs from the whole project.

How do I get my money?

We will submit your company's corporation tax return including the tax credit you're looking to receive. We will attach a report to your corporation tax return explaining to HMRC how you are creating your 'advancement in science and technology'. We will also calculate your qualifying R&D expenses, your R&D tax credit value, and build a technical report to show HMRC why you deserve the relief.

Can I claim if I'm making a loss and don't pay corporation tax?

Yes, you don't need to be paying corporation tax to claim Research and Development Tax Credit. In fact, it's better to be loss-making as you can claim the highest amount (33%) in SME R&D Tax Credit and receive a repayment in cash. The UK government wants to support innovation and technological growth, which is why they are generous in helping companies purely investing in R&D and not generating any revenue.

I've received a grant, can I still claim R&D tax credits?

Yes, you can still file a R&D Claim if you have received a grant. There are two categories of grants for R&D tax credits: 1) Notified State Aid and 2) De Minimis Aid. If you've received Notified State Aid (e.g. Innovate UK) the entire project will need to be put under the Large Company Scheme. If your project has received De Minimis Aid (this includes university subsidies and EU grants) you can claim the costs funded by the grant under the Large Company Scheme, and you can claim the costs incurred from privately funding through the SME scheme. However, this is a complicated area of HMRC R&D Tax Credits and we'd recommend you speak with one of our specialists.

How long does the process take?

We process your claim promptly after finalizing your documentation. HMRC generally takes four to six weeks to process a claim. We check in regularly with HMRC to ensure that your claim is progressing and to respond quickly to any questions about your HMRC R&D Tax Credits. We will also prioritise your claim if you have a deadline or other need.

I use foreign subcontractors from outside the United Kingdom, can I claim on those costs too?

Yes, it doesn't matter that you're paying foreign companies or individuals to carry out R&D work. However, it's important that they go through your UK limited company. You want to ensure you have contracts and invoices in place as supporting evidence for the R&D work being conducted as part of your R&D Claim.

What costs can I include in my R&D Claim?

We'll advise you on which costs can be used in calculating R&D Tax Credit, which include:

  • Employee salaries: including those directly and indirectly involved in the R&D. This could also include indirect costs such as specialist training and recruitment.
  • Subcontractors: costs for paying a staff provider to source external workers (e.g. UpWork), or are contracting an individual or company.
  • Consumed Materials and Hardware: Materials consumed within the prototyping or testing phase.
  • Software: tools used in order to build the product.
  • Utilities: gas, light, electricity used specifically for the R&D project.
What costs don't qualify for R&D?
  • Rent: you can't claim on rent but you can claim on the utilities used to power the space you are using for R&D.
  • Hosting: often a cost thought to be claimable but is not a qualifying cost, even if you have specific test servers.
  • Manufacturing of commercial products: you can't claim costs for manufacturing if they are for products you sell.
Can I make claims for past Research and Development Tax Credit?

Yes, you can. We often file R&D Claims for past financial years for our clients. We are successful 100% of the time in getting their money from the UK government.

When is it too late to claim Research and Development Tax Credit?

You can only claim HMRC R&D Tax Credits back two financial periods. For example, you can claim as late as November 2017 for a financial year that ended November 2015. We can advise you on getting a cash refund for past financial periods and past costs, even if you did not claim R&D tax relief when you filed the original corporation tax return.

How many times can I claim?

You can claim R&D tax credits after each financial period (when you submit a corporation tax return) as long as you are creating a new advancement in science or technology. You have the ability to shorten and lengthen your accounting period, which can give you flexibility for filing a claim.

Can I claim if I've been contracted by another company to do R&D?

You can claim under the Large Company Scheme/RDEC if the company contracting you is considered a large company. If the company contracting you fits under the definition of an SME then you cannot claim on these costs.

How to claim R&D tax credit?

First, determine if your activity is eligible for R&D Tax Credits. At a high level, it can be a technical innovation that requires development and is conducted in an environment of uncertainty. You must also be registered as a UK company for corporate tax. Then, you'll need to develop a written report (called a technical narrative) that describes your technological innovation in line with HMRC requirements. Identifying which of your costs are eligible for money back from the UK government is the next activity. Those costs are then totalled and your R&D Tax Credit is calculated. Finally, submit everything to HMRC and wait for a response. HMRC will either send your money or make a query for additional information or clarifications.

Are R&D tax credits state aid?

If you are a SME that has received a grant you may still be entitled to claim the SME R&D Tax Credit under the SME Scheme. If you have received a grant that is considered State Aid (i.e. grants, subsidies, etc. from public bodies such as Innovate UK) then you can claim under the Large Company Scheme/RDEC where you get back up to 11%. If the grant is not considered State Aid you will be able to claim partly under the Large Company Scheme/RDEC and partly under the SME R&D Tax Credit. Your eligible amount will be how much you spent, less the amount of the grant itself. Many of the companies, startups and SMEs we help receive grants and we can give you a free orientation on how you can claim to receive the most amount back.

Can I claim credits for R&D if my research is subcontracted?

Yes, you can claim in many cases for what you spend on contractors, even if they're outside the United Kingdom. We are even often successful in increasing the amount our clients get by 'connecting' the subcontracts, if possible under HMRC regulations.

How long will it take to get the R&D Tax Credit?

We work hard to make sure that your R&D Tax Credit is approved quickly and without issues. HMRC publishes guidance for the amount of time it will take to approve your credit, but it can be faster or slower. As of January 2021, we are getting money for most of our clients within 30 days of submission.

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F6S can help with your tax credit claim

By providing this personal information, you confirm you agree to us using it to provide our services and to keep in touch regarding information we think may interest you. You also confirm agreement to the Terms of Service and Privacy Policy. You can change your mind about receiving information from us as set out in our policies.

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