As a business who has eligible R&D expenditure to claim under either the SME or RDEC scheme (or both), you will have calculated your eligible R&D expenditure; but how do these numbers actually generate you a tax or payable credit? Below we explore the required documentation for an HMRC R&D Claim, calculations involved, what benefit you will receive and how this can be used in your accounts.
The documents below are used to submit your company’s statutory financial data to HMRC and reflect the R&D Tax Credits:
All of the above, apart from the technical report, are typically prepared by your accountant, and along with the technical report as an attachment, are submitted electronically through their software to HMRC. This is how you submit your R&D claim to HMRC.
With the SME scheme there will be a value of eligible expenditure related to costs incurred whilst undertaking your R&D projects. For the sake of argument let’s take a simple example of £100,000 of eligible R&D costs. This generates two numbers that are used in the HMRC submission:
The tax liability is calculated in the Tax Computation and the Uplifted and Enhanced numbers are recorded into the CT600 and CT600L forms. The benefit for an SME based on this example can vary according to your profitability:
The average R&D claim benefit for an SME per year is £57,000!!
A value of eligible expenditure related to your R&D projects which can include:
There is a seven step RDEC process by which the RDEC eligible spend is adjusted, relating to Corporation Tax rates (currently 19%), the RDEC rate for the period (currently 13%), direct R&D workers PAYE/NIC, outstanding Corporation Tax liabilities and other HMRC liabilities. The seven step process calculation is detailed in the Tax Computation, with resulting numbers being used into the CT600 and CT600L forms.
A claim for £100,000 of eligible spend, would generate a specific benefit of £10,530 if there were no restrictions on PAYE/NICs and HMRC liabilities.
Once HMRC has received your accounts submission, one of three things can happen:
There is also the separate requirement to submit accounts to Companies House within nine months of a year end. Of all the documents above, only the Accounts will feature on the Companies House website. The rest are confidential and are not publicly available, thus any cost associated with R&D projects and the sensitive technical detail in the report remain confidential.
If you’re looking for additional help with your R&D Tax Credits claim, please contact us.