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Research and development tax credits

The tax relief currently provides an enhanced deduction of 230% of qualifying R&D revenue costs and is made up of:

  • 100% of the costs which would normally be deducted without R&D tax relief; and
  • 130% of those tax deductible costs.

This means that for every £100 of qualifying R&D costs, £230 is deducted from the company’s profits, or added to the company’s trading losses for tax purposes.

The key to a successful R&D tax relief claim is being able to prove to HMRC that the particular project falls within the definition of R&D established by the BSI guidelines and may be summarised as: activities which directly contribute to achieving an advance in science or technology through the resolution of technological or scientific uncertainty.

The aim of the R&D project can be to create a new product, a material, or change or improve an process. For example, finding a way of speeding up a production line. Many innovative ideas don’t actually work. That doesn’t matter; a failed R&D project still qualifies for tax relief.

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