A lot more than you’d think. R&D isn’t just about white lab coats. If you’re pushing boundaries and thinking out outside the box in a scientific or technological field, then you’re contributing to society itself and the government wants to help.
There are, of course, a few hurdles to jump before you qualify. The Department for Business, Innovation and Skills has a set of definitions for research activities, which you can see here, but key points include:
• The R&D must involve your core business, or one you want to set up if it goes well.
• The project must be pushing knowledge or capability forward as a whole, not just your own.
• Patents, copyrights and so on are helpful, but not essential.
• What you’re trying to achieve needn’t be tangible. Knowledge or cost improvements count.
• Even if your project doesn’t work out, it could still qualify for the scheme.
Small companies, meaning those with fewer than 500 employees and either:
• A turnover of less than €100 million or... • Gross assets of less than €86 million.
As of the 1st of April 2015, the relief is 230% of the qualifying expenditure.
For example, a company paying tax at 20% will save 45% of the cost of the R&D.
Small companies can also “surrender” trading losses caused by the R&D for a cash payment from HMRC. The payout is 11% of the loss surrender, but is capped at their total PAYE and NIC liabilities for the accounting period.
Small companies can also claim relief on the sub-contract work they do for larger companies. You can’t surrender losses for a payment this way, though. The relief is given under the Large Company Scheme, which is 130% of the qualifying expenditure.
Large companies, meaning those with more than 500 employees and a turnover of over €100 million, can claim relief of 130% of their qualifying expenditure.
This includes sub-contract work to small companies, charities, universities and other qualifying bodies.