Is Research and Development tax relief available?

Research and Development (R&D) tax relief can provide additional tax deductions and enhanced cash flow for companies. HMRC have introduced 'Advance Assurance' which enables small companies to confirm their entitlement to R&D tax relief.

R&D tax relief can allow a company to claim an additional corporation tax reduction of 26% of the expenditure incurred. Alternatively the company can surrender a loss for a cash repayment. A surrendered loss could give a repayment of up to 33.35% of the expenditure. This could significantly improve cash flow for new companies.

To claim R&D tax relief a company must meet several qualifying conditions. Reviewing whether these are met can be expensive and time consuming for small companies. HMRC have therefore introduced Advance Assurance whereby a small company will have access to an HMRC specialist who will discuss whether the activities of the business meet the qualifying requirements.

In order to access Advance Assurance, the company must:

  • not have claimed R&D tax relief before
  • have an annual turnover of £2 million or less
  • have less than 50 employees.

We can apply for Advance Assurance on your behalf but any discussions about the business will be carried out with a main contact in the company (appointed by the company in the application). HMRC state that most applications are dealt with by a short telephone call. We will be able to contribute to the discussions if there are any difficulties.

If HMRC agree that the company qualifies to claim R&D tax relief they will then allow the claim for the next three accounting periods without further queries. If you're planning to carry out R&D at a future date, Advance Assurance can still be applied for. HMRC will contact you after you've submitted your first claim to check that the R&D matches the details supplied in the Advance Assurance application.

If you think your company may carry out research and development activities please contact us to talk about the available tax reliefs.