Murray Patt, founder of accountants Alexander Knight & Co says changes made by HMRC to the popular ‘R&D Tax Credits’ scheme are a reminder to check if your own business qualifies.

R&D Tax Credits are designed to encourage UK companies to invest in ‘research and development’. Correctly administered they can reduce your tax bill or you can claim payable cash credits as a proportion of your R&D expenditure.

Since the scheme was launched, our team has claimed back thousands of pounds for clients. The successful claims we’ve made on their behalf range from £5,000 to hundreds of thousands of pounds.

In my experience, too many businesses across the UK are missing out on this valuable tax break worth hundreds of millions of pounds.

Shifting criteria

The R&D scheme is part of the Government’s drive to boost innovation. It means that businesses investing in the research and development of new products and processes get a tax deduction on qualifying expenditure, including staff wages, materials, overheads, software and utility bills, as well as the ability to claim cash back from HMRC.

The scheme is under continuous review and significant changes were recently introduced – and there are more changes to come.

The rules and qualifying criteria for the scheme can be complex for inexperienced claimants in terms of identifying what kind of business expenditure actually qualifies. This is particularly true in cases where clients employ or subcontract work overseas.

For example, the Government soon intends to implement a new change whereby only R&D activity being performed in the UK (subject to specific exemptions) will qualify. This will come into effect from 1 April 2024.

A new digital application process became mandatory this summer where project and expenditure details need to be supplied in a specific format as well as a variety of other administrative changes.

The government have helpfully extended the scope of what costs can be claimed as qualifying R&D expenditure and this includes artificial intelligence (AI) an area in which more of our clients are investing and exploring the possibilities.

Do it properly… and professionally!

The key to making a successful claim is to correctly identify what expenditure qualifies, when it was spent and record it accurately for HMRC in the newly updated prescribed manner.

The process can be complex which is why we have a specialist R&D tax credits team managing the claims to a successful conclusion on behalf of our clients. You can read more on the official guidance issued by the Government here.

If you want to understand more about how your business can claim ‘R&D tax credits’ email Murray Patt (murray@alexanderknightaccountants.co.uk) or call me on 0161 980 8788.