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What are R&D Tax Credits?

With pretty much everything being taxed these days, it’s good to know what you can claim back in tax relief now and in the future. While Research and Development (R&D) tax credits can only be claimed by UK companies that have been trading for one year or more, it’s always worthwhile to be prepared and know how this specific tax saving can benefit you later on.

R&D Tax Credits is a government-backed tax relief scheme aimed at companies involved in designing and manufacturing innovative products or conducting research. This includes testing or trialling as well as making improvements to internal systems or processes if unique innovation was involved. 

There is a chance to claim back up to 32.6% of development costs through this tax credit, yet many companies have either not heard of this relief or feel they don’t qualify.  This has resulted in billions of pounds worth of unclaimed money.

Back in early December, George Osborne announced in the Autumn Statement the R&D Tax Credit would be increasing from 225% to 230% for small firms from April 2015. This will create even better savings for SMEs.

So who is eligible?

Any incorporated UK company that:

  • Produces or develops new software or products, or writes new unique  code or algorithms to interface into their systems or processes
  • Improves or renews manufacturing procedures using unique innovation
  • Conducts testing/prototypes
  • Has developed products or software that have failed/not launched  (you can claim the tax credit back as far as two financial years)
  • Has employees with a scientific or technical background

What’s more, if your company is struggling financially and is in arrears with HMRC, you can claim R&D Tax Credits to offset against the total liability. As well as claiming this tax relief, it’s best to look at turnaround and restructuring options to help improve cashflow and cut costs.

How can I make a claim?

If you would like to find out if your company qualifies for the tax credit, contact a specialist who can advise you if you may be eligible and will manage the entire claim process with HMRC. 95% of the companies they meet qualify for the scheme.

Anna-Lisa Searle writes for turnaround and insolvency specialist firm KSA Group, and is a contributor to

This information should not be interpreted as financial advice. Commercial mortgage rates are subject to change. Speak to our advisors for a mortgage illustration.