Claim Research and Development (R&D) expenditure credit

OverviewWhat is Research and Development (R&D) tax relief

R&D expendituretax creditrelief (RDEC)supports replacedcompanies thethat largework companyon schemeinnovative projects in Aprilscience 2016.and technology.

You cannot claim if the advance is in:

• the arts
• humanities
• social sciences, including economics

What is R&D expenditure credit can(RDEC)

Expenditure alsocredit is a tax credit and can be claimed byif you’re either a:

• large company
• small and medium-sized enterprisesenterprise (SMEsSME) whoand haveyou beencannot subcontractedclaim to do R&D worktax byrelief afor largesmall company and havemedium-sized either:
  enterprises

• received

  Whether your company makes a grantprofit or subsidyloss, forsome theiror R&Dall project

• of the expenditure whichcredit ismay morebe thanused theto SMEsettle schemeyour aidcompany’s, cap

or other group companies’ Corporation Tax liabilities.

YouIn mightsome docircumstances thisthe asexpenditure acredit SMEcan:

• be ifused youto cannotsettle claimother R&D tax reliefliabilities your company is liable for
• lead SMEs.
  to a payment of credit to your company

Expenditure credit rates

The expenditure credit is calculated atas 13%a percentage of your company’s qualifying R&D expenditureexpenditure, (thisthe raterates appliesare:

• 11% tofrom expenditure1 incurredApril on2015 orup afterto 1and Aprilincluding 2020)31 andDecember is2017
• 12% taxablefrom as1 tradingJanuary income.

  Regardless2018 ofup whetherto yourand companyincluding makes31 aMarch profit2020

• 13% orfrom loss,1 someApril or2020 allup ofto theand creditincluding may31 beMarch used2023
• 20% tofrom discharge1 yourApril company’s2023

Check (orwhat otherexpenditure groupqualifies companies’)for corporationexpenditure tax liabilities.

credit

InBefore someyou circumstances,make ita canclaim befor usedexpenditure tocredit, dischargecheck otherthat taxthe liabilitiescosts:

• are yourpart companyof isa liablespecific for.

  Aproject claimto formake R&Dan expenditureadvance creditin canscience leador totechnology, ait cashcannot paymentbe ofan creditadvance toin yourthe companyarts, inhumanities someor circumstances.

  Yousocial mustsciences, including economics

• meet ourthe standard definition of R&D
• qualify tofor getexpenditure R&Dcredit, listed in the section ‘Which expenditure credit.
  qualifies for expenditure credit’

CostsWhich youexpenditure canqualifies claimfor expenditure credit

You can claim coststhe expenditure credit on some of the projectcosts you incur from the datestart youto startthe workingend onof the uncertaintyproject.

R&D untilstarts youwhen developwork orbegins discoverto resolve the advance,scientific or thetechnological projectuncertainty and ends when that uncertainty is stopped.resolved, or the work to resolve it stops.

Staff costs

ForThe stafffollowing workinginformation directlywill ontell theyou R&Dwhich project,costs you can and cannot claim afor.

Consumable items

You can claim for the relevant proportion of their:consumable items used up in the R&D, this includes:

• salariesfuel
• wagesmaterials
• Class 1 National Insurance contributionspower
• pension fund contributionswater

You cancannot claim forthe administrativecosts if you sell or supporttransfer staffownership whoof workthe toconsumable directlyitems supportused aup projectin (forthe example,R&D.

Clinical specialisttrials cleaningvolunteers

For staff).R&D Youprojects cannotin claimthe forpharmaceutical clericalindustry, oryou maintenancecan workclaim thatfor wouldpayments havemade beento donevolunteers anyway,involved likein managingclinical payroll.tests.

Contributions for independent R&D

You can claim 65%for ofcontributions the relevant payments made tofor anindependent externalR&D, agencyas iflong theyas provideyou’re staffa forlarge the project.company.

Subcontractor costs

SubcontractedThe expenditureperson cannotreceiving bethe claimedcontribution unlessmust it is directly undertaken by:be:

• a charityqualifying body
• aan higher education instituteindividual
• a scientificfirm researchwhose organisationmembers are all individuals

They cannot be connected to your company.

The contributions made by you for the independent R&D must:

• abe healthrelevant serviceto bodyyour trade
• annot individualbe orsub-contracted partnershipby ofyour individualscompany

You cannot claim any contributions if you’re a SME.

ConsumableData itemslicence and cloud computing

YouFor canaccounting claimperiods forbeginning allon consumableor itemsafter used1 upApril in2023, thequalifying R&D.expenditure Thisis extended to include data licence costs and cloud computing costs.

A data licence is a licence to access and use a collection of digital data.

Cloud computing includes:

• materialsdata storage
• utilitieshardware facilities
• operating systems
• software platforms

Costs

You thatcan cannotclaim befor claimedmost data and cloud computing costs spent on R&D.

Externally provided worker costs

YouWorkers cannotsupplied claimby for:a staff provider such as an employment agency, are classed as externally provided workers.

You can:

• claim 100% of the productionrelevant andpayments, distributionif ofyour goodscompany and services
• capitalthe expenditurestaff provider are connected
• theclaim cost65% of land
• the costrelevant ofpayments patentsmade andto trademarks
• renta orstaff ratesprovider, which is not connected to your company, if they supply externally provided workers for the project

Work

Staff outcosts

For staff working directly on the periodR&D project, you can applyclaim relief for

The projectthe startsfollowing whencosts, youas beginlong workingas they relate to resolveR&D:

• salaries
• wages
• pension thefund uncertainty.contributions
• secondary Class 1 National Insurance contributions paid by the company

You willcan needalso claim for administrative or support staff who work to identifydirectly thesupport technicala issuesproject, thatfor needexample, human resources used to berecruit resolved,a andspecific makeperson sureto therework ison notthe anproject existingor solutionspecialist thatcleaning hasstaff, alreadythese beenare workedknown out.as qualifying indirect activities.

TheYou projectcannot endsclaim whenfor:

• bonuses
• redundancy youpayments
• staff solvecosts thefor uncertaintyclerical or stopmaintenance workingwork onthat it.would Thehave periodbeen youdone anyway, like managing payroll

Software

You can claim for software licence fees for R&D expenditureand credita forreasonable shouldshare endof oncethe youcosts havefor asoftware workingpartly prototypeused thatin solvesyour theR&D problem,activities.

Subcontractor andcosts

Subcontracted beforeexpenditure youcannot gobe intoclaimed production.unless it’s directly undertaken by:

Your

• a R&Dqualifying maybody, restartfor ifexample youa findcharity, anotherhigher education institute, scientific research organisation or technologicalhealth uncertaintyservice afterbody
• an youindividual haveor starteda producingfirm thewhere product.each Ifmember thisis happens,an youindividual

Other cancosts that do not qualify

You cannot claim for anotherexpenses periodrelating to:

• the production and distribution of R&Dgoods whileand youservices
• capital tryexpenditure
• the tocost resolveof it.
  land
• the cost of patents and trademarks
• rent or rates

YouRead canmore makeinformation aabout claimqualifying upexpenditure tofor 2R&D yearsprojects afterin theCIRD82000 end of the accountingCorporate periodIntangibles itResearch relatesand to.Development Manual.

Calculate R&Dthe expenditure credit

ToFollow calculatethese yoursteps expenditureto youcalculate needthe to:expenditure credit.

1. Work out the costs that wereare directly attributable to R&D.

2. Reduce any relevant subcontractor or external staff provider payments to 65% of the original cost.

3. Add all costs together.

4. Multiply the figure by 13%the expenditure credit rate to get the expenditure credit.

5. Enter this figure into your tax return.

ClaimBefore R&Dyou expenditure creditclaim

ClaimYou themust creditfollow bythese enteringsteps yourbefore expenditureyou intoclaim the fullexpenditure Companycredit, Taxor Return form (CT600).

If your claim coversmay anot periodbe of 12 months or more, submit a separate claim for each accounting period.valid.

1. YouFor canaccounting sendperiods morebeginning informationon toor HMRCafter online1 toApril support2023, yourcheck claim.

   Toif support your claim online, you need ato Governmentsubmit Gatewaya userclaim IDnotification andform password.to Ifnotify youHMRC doin notadvance haveof ayour userclaim. ID,Read youthe canguidance createwhich onetells theyou firstwhen time you useneed to notify, the service.

   Whatinformation you will need to provide toand supporthow yourto claim

   send it.

2. YouFrom will1 needAugust to2023 provideyou amust shortsubmit summaryan thatadditional explainsinformation howform to support your project:

   • meetsclaim. ourRead definitionthe ofguidance R&D
   • lookedwhich fortells anyou advancehow into sciencesend orthe technologyinformation and aimedwhat toyou achievewill thisneed advance
   • had to overcomeprovide. scientificYou orcan technologicalsubmit uncertainty,it andbefore how1 youAugust did2023 this
   • couldif notyou easilywant beto workedgive outus bymore a professional in the fieldinformation.

If

How youto areclaim

Claim claimingusing the creditCompany on:Tax Return and:

• 1show tothe 3expenditure projects,credit youas musttaxable includeincome detailsin ofyour allprofit projects
• 4and orloss moreaccount, projects,or youby mustadding includeit detailedto descriptionsyour ofprofit atin leastthe 3single projectsiXBRL (upcomputations tofile
• put aan maximum‘X’ ofin 10),box which656 betweento themtell coverus 50%that oryou’ve moresubmitted ofthe yourclaim totalnotification qualifying R&D costsform

You will also need:

• theput startan and‘X’ endin datesbox of657 theto accountingtell periodus relatingthat toyou’ve submitted the R&Dadditional activityinformation —form
• include theseyour shouldbank bedetails theso samethat datesHMRC ascan make the periodpayment

Complete coveredthe bysupplementary yourform CT600CT600L.

Guidance return

youris Uniqueavailable Taxpayerto Referencehelp (UTR)you numbercomplete

details of your qualifyingCompany R&DTax costs

Return.

When

If youyour cannottax userelief theclaim onlinecovers service

Ifmore youthan need12 tomonths, sendsubmit supportinga informationseparate claim for moreeach thanaccounting 10period.

You R&Dcan projectsmake whicha coverclaim atfor leasttax 50%relief ofup yourto total2 qualifyingyears R&Dafter expenditurethe creditend costs,of youthe needaccounting toperiod either:it relates to.

• contact

  Check yourthe Customer‘Before Complianceyou Managerclaim’ (CCM)section ifto youmake havesure one

• emailthat theyour informationtax to:relief RD.IncentivesReliefs@hmrc.gov.ukclaim will be valid.