Who can claim Software & IT R&D Tax Credits?
R&D TAX CREDITS EXPLAINED To encourage research and development in the software & IT industry, the government introduced R&D Tax Credits in 2000. The Small to Medium-Sized Enterprise (SME) and Research and Development Expenditure Credit (RDEC) schemes reward R&D activity by providing Corporation Tax relief or cash credits. The schemes ensure SMEs and large businesses alike can claim software and IT R&D Tax Credits, encompassing profitable and lossmaking companies. Over 90,000 R&D Tax Credit claims were made by UK companies in the 2021-22 tax year, an increase of 5% from the previous year
REDUCE YOUR HMRC LIABILITY •
A government incentive dedicated to advancing the technology, information and internet industries
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Launched in 2000 for SMEs and in 2002 for larger companies
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Rewards innovation, risk taking, and research and development
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Backdate claims by up to two financial years
Collectively, UK companies claimed £7.6billion in tax relief over 12 months
WHAT COSTS CAN YOU CLAIM FOR?
Successful claims are paid either as relief against Corporation Tax, or as cash credit Claims can be backdated by two years R&D Tax Credit calculations consider the overhead costs associated with expenditure during research and development projects as the government aims to reward software and IT innovation. In most circumstances, SMEs can benefit from R&D tax relief by claiming payable tax credits in cash from HMRC.
OVERCOMING TECHNICAL CHALLENGES
STREAMLINING BUSINESS PROCESSES
DEVELOPING BESPOKE SOFTWARE
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Staff wages and other related costs
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Payments made to subcontractors and external workers
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Consumed material costs
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Software licensing costs
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Payments to clinical volunteers
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Lighting, heating and power costs
CREATING AND TESTING PROTOTYPES
TRIALLING NEW OR SUBSTITUTING MATERIALS
TRIAL AND ERROR
WHO IS ELIGIBLE? •
UK limited companies actively trading
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Companies of all sizes
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Profitable and loss-making businesses
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Eligible R&D spend within the qualifying period
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All companies undertaking research and development in the software and IT sector
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HOW DOES THE R&D TAX CREDITS SCHEME WORK? Introduced by the UK government in 2000, R&D tax credits are a form of tax relief for research and development work undertaken by a business, providing you with a tax reduction or a lump sum payment. Delivered by HMRC, R&D Tax Credits are an incentive introduced to encourage investment in research and development projects from software and IT companies. Tax Credits allow a company to reduce its tax bill or claim cash credits as a proportion of its R&D expenditure over the qualifying period. You can make a claim each year. As well as the latest financial year, you can also claim retrospectively for the previous two years. For example, if the end date of your accounting period each year is March 31, you would need to submit your R&D tax credit claim for the accounting period April 1 2021 to March 31 2022 before midnight on March 31 2024. Separate schemes exist for SMEs and larger companies with different rates of relief. Profit-making SMEs can expect to receive up to 21.5% of their qualifying R&D expenditure as a tax credit, with the equivalent figure being 20% for large companies under the RDEC scheme.
WHICH R&D ACTIVITIES QUALIFY? R&D encompasses activities undertaken by companies attempting to solve a problem and looking to overcome technological difficulties by creating new products and services or improving existing ones. To qualify for R&D tax relief, the process does not need to be successful.
Examples of eligible R&D activities in the technology, information and internet sector are: •
Developing new algorithms and software
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Overcoming technical issues relating to compatibility, stability and scalability
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Enhancing new and existing systems via reverse engineering
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Undertaking bespoke projects with innovative solutions
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Effectively responding to changes and updates in the software development industry
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Identifying cyber and data security improvements
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WHAT DOES THE FUTURE HOLD? The Treasury plans to simplify R&D Tax Credits while ensuring technology, information and internet companies that invest heavily continue to be incentivised. The government remains committed to supporting R&D-intensive SMEs, with tax relief providing essential support. As such, the government has outlined its intent to increase public funding of research and development, targeting UK investment in R&D of 2.4% of UK GDP by 2027.
IN SUMMARY... The good news is that the government has demonstrated a commitment to helping companies that undertake R&D work, having increased the rates of tax relief in recent years. This support can potentially transform a business by enhancing productivity, stimulating innovation and having a positive holistic impact. However, HMRC requires every claim to be submitted in line with its strictly defined procedure. For example, HMRC must be pre-notified of an intended claim. This is why having an expert like randd on your side is vital, ensuring all the necessary boxes are ticked. We can work alongside you to identify genuine qualifying expenditure which is often overlooked by self-claimants or accountants, and to fully maximise your claim.
RANDD’S MOST ACTIVE SECTORS MANUFACTURING
CONSTRUCTION
SOFTWARE & I.T.
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CLAIMS SUBMITTED
CLAIMS SUBMITTED
CLAIMS SUBMITTED
£51.6K
AVERAGE CLAIMED
£41.8K
AVERAGE CLAIMED
£45.5K
£19.62M
£5.93M
£9.19M
TOTAL CLAIMED
TOTAL CLAIMED
AVERAGE CLAIMED
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ABOUT RANDD Since randd was founded in 2008, we have helped thousands of UK businesses successfully claim back millions of pounds using the R&D Tax Credits initiative via our simplified and efficient claims process. Our record speaks for itself and we maintain unrivalled success rates with an average claim value of £50,000. From our headquarters in Derby and over 20 UK offices, our team of Chartered Accountants and technical experts have successfully submitted around 4,500 claims for our clients and secured more than £200m on their behalf. Whether it is a client’s first claim or they have benefitted from R&D Tax Credits in the past, we take the time to understand their company. Our strong relationship with HMRC allows us to deal with each claim entirely on our client’s behalf while optimising claim value.
20+ UK offices
4,450+ Claims submitted (and counting)
£219m+
Claimed back for our clients
£50,000 Average claim amount
CLIENT STORIES With our unique six-step process that is tailored specifically to each client, our team of Tax Credit specialists have been able to compile an impressive collection of success stories in the technology, information and internet industries. We work tirelessly to make sure every claim is refined to guarantee results, and that level of care and commitment can be seen across the following selection of case studies. Our team boast the ideal combination of skill, experience and industry knowledge to help secure the highest possible payout from HMRC. Every client has a unique story to tell. The businesses showcased across the following pages regularly conduct research and development activities that qualify under the R&D Tax Credits scheme, and each company is unique in its innovation process.
We have helped a broad range of companies in the technology, information and internet industries and you could be next. Contact us
01332 409 714
info@randduk.com
SECTOR – E-COMMERCE CLAIM VALUE - £129,000 An e-commerce site for luxury interiors has received a total of £129,000 in R&D tax credits following its latest claim of £63,000 secured by randd. The London-based company provides high-quality interior furnishings, sourcing products from world-leading brands and unique artisans. The online shopping site incorporates technology that tailors products for shoppers based on their previous purchases and browsing history.
£129,000 CLAIMED IN R&D RELIEF
A team of experienced software developers and engineers is employed in-house to enhance the online shopping experience for customers in the future.
SECTOR – COMPUTER GENERATED IMAGERY (CGI) CLAIM VALUE - £16,000 A Brighton-based CGI specialist worked with randd to submit its R&D tax credits claim to HMRC and successfully received £16,000. Founded in 2010, the company combines art with technology to create original and innovative animations and illustrations.
£16,000 IN TAX RELIEF AWARDED
Continued research and development is vital in an industry with rapidly developing technological advancements, and a challenge many UK businesses face is finding the time to understand and apply for R&D tax credits, particularly for those companies which have limited resources to spare on activities other than the main business priorities.
randd’s assistance in applying for R&D tax credits has enabled this company to continue with pushing boundaries and funding innovations such as virtual reality, 360 video, animation and more.
SECTOR – ONLINE MAPS CLAIM VALUE - £28,000 A Berkshire-based online maps business has received a total of just over £28,000 in R&D tax credits over two years after enlisting randd to manage its claims. The company has worked for seven years to translate complex file formats, processing them into readily usable web-enabled forms. This has opened up what was previously an inaccessible speciality so that smaller businesses and individuals with little or no GIS (Geographic Information System) experience have easy access to this information.
£28,000 IN TAX RELIEF AWARDED OVER 2 YEARS
They are working to develop a high-resolution, seamless mapping solution for addresses and postcodes within Great Britain, harbouring a culture of innovation as the company works to develop and refine its mapping software package.
SECTOR – DIGITAL MARKETING CLAIM VALUE - £15,000 This Warwickshire-based company blends logic and creativity, making content for brands including podcasting, animation, websites, motion graphics and video etc.
£15,000 IN TAX RELIEF AWARDED
Also, as a marketing software business, they have developed several technology platforms. The key platform supports the marketing briefing and allocating for marketing campaigns, mainly for instore marketing materials such as point-of-sale printed materials, typically for supermarkets, homeware stores and fashion stores.
CLIENT TESTIMONIALS “I really couldn’t be happier with the claim and the work randd have done for me on it. You’ve made a complex and potentially problematic process almost quite pleasant and very worthwhile.”
“HMRC’s form looked difficult to fill out – we are grateful for the expertise of randd who have a past history of successful claims and a good relationship with HMRC.”
“Working with randd is a seamless engagement… when the initial paperwork comes through it can be daunting, but it looks like there is more work than there is.”
We have helped a broad range of companies in the technology, information and internet industries and you could be next.
Contact us today! today!
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01332 409 714 info@rannduk.com www.rannduk.com