Guidelines for companies to qualify for R&D relief Credits

Date: 29th January 2014

Imagine that you are running an Electronic company manufacturing LED lamps. You have succeeded to improvise LED lamps uniquely and efficiently by spending a considerable amount of money on its research and development. Now it’s time to claim the benefits of Research and Development tax relief provided by the HMRC, UK.Tax Relief is given as a credit, on account of R&D expenses. 

The Research and Development tax credit is applicable for Small, Middle and Large Sized companies.

Here are a few points which might guide you to approach R&D tax relief scheme.

  • First the company has to be liable for paying corporation taxes
  • The company has to satisfy set of norms given by the Department of business, Innovation and skills [formerly known as, Department of trade and industry (DIT)].
  • Companies need to have an active R&D sector involved in manufacturing or upgrading their product.
  • The HMRC does not expect your R&D to invent a new device or product or to revolutionize the whole world but,your R&D has to achieve a unique advancement favorable to users.
  • The company has to make some form of investment in the R&D sector in order to qualify for R&D tax relief. The par investment for qualification varies for small, medium and large companies.
  • R&D staff has to be employed under the company based on contracts. Consultants are not considered as employees.
  • Companies performing Engineering projects might easily qualify for R&D tax relief.
  • Engineering projects on all sectors including software, Web based technologies are welcome for R&D tax relief

This tax scheme is implemented by the HMRC, Government of UK purely to ensure mutual benefits for the company and consumer. Companies need to analyze and identify the functionality of their R&D sector by themselves or with the help of an expert consultant and thereby obtain R&D tax relief.

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