Innovation

R&D Tax Incentives

Research and Development (R&D) tax incentives can significantly reduce your company’s tax bill, and could even get you some cash back.

What are R&D Tax Incentives?

R&D tax incentives are a means of encouraging companies to innovate through a financial reward for developing new technologies to substantially improve products, processes, devices, materials and/or services.

Companies that are eligible for the tax incentives are extremely diverse. We have prepared claims not just for high technology companies in software, aerospace, defence, automotive etc. but also more ‘traditional’ manufacturing and engineering companies.

Who can claim?

All companies, large and small, can claim if they undertake qualifying work – even if they do not pay corporation tax.

What are R&D tax incentives worth?

There are two schemes that a company may claim under: The merged scheme which will apply to most companies and for loss making companies who meet the criteria, the Enhanced R&D intensive support (“ERIS”).

Merged Scheme: For claim periods starting on or after 1 April 2024, the relief will be a taxable credit of 20% of the qualifying R&D expenditure, broadly using the same mechanics as the previous RDEC scheme. This will usually generate a net tax saving at 15% (net of corporation tax at 25%)

ERIS: Despite the move to a ‘single’ system of R&D relief, a separate SME scheme will apply. For claim periods starting on or after 1 April 2024, if a company’s total R&D is at least 30% of its total trade expenditure, it will enjoy an enhanced expenditure deduction of 86%, and a payable tax credit of 14.5% – meaning relief for losses will be given at 27% of qualifying spend.

Is my project qualifying for R&D?

In order for your project to qualify your project must seek an advance in a field of science or technology by resolving scientific or technological uncertainty.

Does it sound straightforward? There’s actually a lot of detail behind this definition. At Hazlewoods, we’re happy to discuss it further during a free initial consultation.

When to make a claim?

A claim for R&D tax incentives must be made within two years of the end of the year in which the R&D work is undertaken subject to the new claim notification rules which may require a company to notify of its intention to make a claim within six months of its year end. Therefore it is best to get in touch as soon as possible, if you would like to consider making a claim.

Which costs qualify for R&D tax credits?

Certain costs incurred in undertaking eligible development work can qualify for enhanced tax relief and credits. These include:

Staffing costs – for time spent directly and indirectly on R&D.
Consumable items – including power and water costs and consumable materials
Software used for R&D – including cloud computer costs and data licences
Certain payments to sub-contractors/prototype costs
Some external workers – depending upon where they are located.

R&D grant funding opportunities

Due to some important changes to R&D tax credits for periods commencing on or after 1 April 2024, securing R&D grants no longer has any impact on the R&D tax credits claim.

We can put you in contact with grant bid consultants, please contact us for more advice. Click on the link to see some of the latest grants available.

Find out more

Client story: Auger Torque Europe Limited

Background: Established in 1998, Auger Torque Europe Ltd develops and produces hydraulic attachments for the construction and agricultural industry. The continuing demand for transportation and infrastructure is constantly driving product development and service. As a result, the company is continuously expanding its product range.

How we helped: Since 2013 Hazlewoods has worked closely with Auger Torque Europe Limited to understand the composition of the company’s sales and the nature of the patented technology, to assist the company in identifying the relevant income and profits for Patent Box purposes.

Mike Cartwright, Chief Financial Officer at Auger Torque Europe Limited, said “Hazlewoods has been a great support to Auger Torque. They have taken the time to understand our business and the products that we sell and used this knowledge to submit successful R&D and Patent Box tax relief claims to HMRC.”

Client story: Rapid Ramp

Background: With over three decades of industry expertise, Rapid Ramp stand at the forefront as a premier manufacturer, supplier, and installer of modular ramps and steps in the United Kingdom.

How we helped: Mark Pons, MD of Rapid Ramp said, “We have benefited significantly from the Patent Box tax relief scheme. Effectively we now pay 10% Corporation Tax instead of the standard 19% (which has now increased to 25% on our profits attributable to patented products). Jemma collaborated with HMRC to determine the notional royalty that could be appropriately applied with respect to Patent Box. Recently we successfully acquired new business premises, and this achievement was partly facilitated by the tax savings we had accumulated. As a result, our business is now poised for significant growth.

In summary, the Patent Box is a highly valuable tax relief for businesses like ours. I thoroughly recommend Patent Box and the expert advice that Hazlewoods have brought to my business.”

Client story: TBS Engineering

Background: Founded in 1968, TBS Engineering is a world-leader in producing automatic machinery for the lead acid battery industry.

How we helped: When Patent Box was first introduced, Hazlewoods explained the intricacies of the legislation to TBS Engineering and how this
could apply to the company’s assembly line sales. Due to the complexities involved, Hazlewoods arranged a meeting with HM Revenue and Customs at the company’s premises to discuss and agree its conclusions.

Jon Curtis, Group Finance Director of TBS Engineering Limited, said: “Hazlewoods made a complicated claim process relatively straightforward for us. After initial discussions to understand how the patented items incorporated into our products, Hazlewoods liaised directly with HMRC on our behalf to ensure that all relevant income was fully captured. The services provided to us in respect of R&D and Patent Box reliefs has been invaluable.”

Client story: Ubiqutek Limited Trading as Rootwave

Background: Rootwave kills weeds using electricity to give better weed control at a lower cost than chemical herbicides whilst protecting health and helping nature restore its soils, water and biodiversity.

How we helped: After dealing with Hazlewoods in a previous company our services were recommended to Rootwave by the interviewee, this is what she had to say.

How has Hazlewoods helped you and what has this meant for Rootwave?
“We needed a larger accountant with more specialist knowledge, and this is what Hazlewoods excels at. Jimmy has been extremely helpful, with no question left unanswered. Hazlewoods also prepare our R&D claims for our grant funded projects and that process has been seamless too. As we plan to grow over the next few years, having someone onboard with the dedication and skills was paramount. By choosing Hazlewoods with their size and international connections it meant we wouldn’t run the risk of outgrowing our accountants again. It’s the long-term investment and relationship that has benefited us and allowed us to expand.”

How did you find the process, did you clearly understand what was required of you?
“The process has been smooth and exactly what we required. Jimmy was very receptive to meeting as and when it was required, either in person, Microsoft Teams, or a phone call. The templates he provided were great and allowed Jimmy to be clear on what he required from us. It also meant he could provide clarity on the parameters within which he could operate.” Continued onto next page…

Client story: Ubiqutek Limited Trading as Rootwave Continued

Continued…

Any other thoughts you would like to share about your experience with Hazlewoods?
“As grant audits are so important for the release of grant funding, the turn-around we have experienced with Hazlewoods has been great. This is especially important due to the deadlines that are put in place for submitting the applications. They have been reliable with their deadlines across the board in other areas too, which has really helped us. The specialist services that Hazlewoods can offer is unmatched which is reflected in the investment you make for longer term benefit.”

Finally, what does the future hold for Rootwave?
“We are hoping to expand. We are currently carrying out some fund raising with a view to selling some new products next year. As we are a venture capital company, the advice we have received from Hazlewoods has been crucial. As we required more specialist knowledge and advice, Hazlewoods was able to deliver that advice because of the experts they have in their fields. We are glad we have them onboard so we can move with alongside them as we grow.”