Qualifying for R&D tax credits and how to calculate your claim

If you work in medical research, scientific investigation or technological innovation, the government might have some money for you.

Companies whose work involves research and development can claim some of their tax back under the research and development tax credits scheme. But are you likely to get a decent amount of money, or would your time be better spent looking for 50p down the back of the sofa?

How much you can get back will depend on a variety of factors, such as the size of your company, its tax rate, and how much of your work qualifies as research and development.

However, to help you get a bit of an idea, here are the main things you can claim for:

Staff costs: For staff who are directly working on research and development, you can claim a proportion of their salaries, national insurance contributions, pension contributions and expenses. This includes supervisors, managers and support staff if they are doing work specifically for the project. Work that would have been done anyway, like managing payroll, doesn’t count.

Agency workers: You can claim up to 65% of the money paid to recruitment agencies for staff hired to work on research and development.

Subcontractors: If you subcontract some of your research and development, the proportion of those costs you can claim back depends on the size of your company, and whether the company you have subcontracted to is connected to yours.

Small companies can usually claim back up to 65% of subcontracted costs. A small company is one with fewer than 500 staff and either a turnover of less than €100m or a balance sheet total of less than €86m. Larger companies can only claim if they’ve subcontracted the work to a charity, higher education institute, scientific research organisation, health service body or individual or partnership of individuals (so not a corporation).

Materials and utilities: You can claim for materials you’ve used up in your research, as well as a proportion of your utility bills.

Software: You can claim for all or part of the cost of software you’ve bought to use in your research and development, depending on whether you use the software for other things too.

Clinical trial volunteers: You can claim some of the cost of paying them to take part.

Prototypes: You can claim some of the design, construction and testing costs for prototypes – unless you are going to sell the prototype, which will reduce what you can claim.

You can’t claim for:

• The production and distribution of goods and services
• Capital expenditure
• The cost of land
• The cost of patents and trademarks
• Rent or rates
• Employment-related benefits

What if I’ve made a loss?

You can still claim if you’ve made a loss – in fact, the scheme is slightly more favourable to you! Profitable small companies will get on average 25% of their costs back, and loss-making small companies can get up to a third of their costs back.  Large companies, both profit and loss-making, can get up to 9.7% of their costs back.

Have a look at this r&d tax credit calculator to see how much you could be eligible for.