The blog article looks at the 7 key factors for fintechs and financial firms to qualify and claim the R&D Tax Credits. and financial services firms. Buckingham Capital Consulting is a leading regulatory consulting firm, specialising in e-money, payments and banking. We are helping firms claim R&D tax credits in the UK.
1. Can I claim R&D Tax Credit Relief?
R&D becomes applicable when a project is seeking to advance overall knowledge or capability. It allows companies to carry out qualifying R&D related activities and claim corporation tax deductions. The level of the deduction depends on the scheme you use, which we will cover below.
In order to qualify for the R&D tax credit relief, your business must fall under the definition of an SME. An SME is where a company has:
- staff headcount of less than 500
- either turnover EUR 100m or the balance sheet must be less than EUR 86m.
2. Do my projects qualify for R&D Tax Relief?
In order to qualify for R&D tax credits, you must show the following:
a. what is the scientific or technological advance you made?
Your project must show that it is developed for scientific or technological advancement. Rather than stating your product, process or functionality, the focus here should be the advancement your firm your made or is making.
b. what scientific or technological uncertainty did you face?
You should show the scientific or technological uncertainty which existed and you aimed to tackle. Scientific or technological uncertainty exists when knowledge of whether something is scientifically possible or technologically feasible but achieving it isn't readily available e.g. by an expert professional working in a field.
c. how and when were the uncertainties overcome?
Here you must describe the methods you used to overcome the uncertainties, including the investigations and analysis undertaken. You may also wish to describe the successes and failures you faced and the impact these had on your overall project. If the uncertainties weren't overcome then you should explain what happened. Remember, that the commercial failure of the project does not mean that the R&D was not present. Even if the scientific uncertainties were not overcome, your project can still qualify for the R&D tax credits.
d. why wasn't the knowledge being sought readily available by competent professionals?
If the innovation you were seeking was already available e.g. by a competent professional then you will be questioned as to why you didn't simply rely on such a professional instead of pursuing a new project. You should therefore demonstrate that the knowledge sought was not readily available and that the technological uncertainty therefore still existed.
3. The start and end of an R&D project for tax purposes
It is important that you know when an R&D project starts and ends so that your company is claiming the correct amount of relief.
4. What cost can I claim for my R&D tax credit relief project(s)?
Below is the list of the type of costs you can claim for:
1. Direct R&D staff costs - e.g. salaries and wages of those involved hands-on in the R&D project.
2. Externally provided R&D staff - e.g.external agency staff
3. Subcontracted R&D - you can claim 65% of the payment for unconnected/subcontracted parties.
4. R&D consumable items - e.g. materials such as water, fuel, and power consumption.
5. Software directly used in the R&D
6. Clinical trial volunteers - this is likely to be more relevant for pharma companies.
7. Contribution to independent research
8. Prototypes - the design, construction and testing costs are qualifying expenses.
9. Collaborative working e.g. two companies collaborating on an R&D project.
5. What costs do not qualify for an R&D tax relief claim?
The following do not qualify for R&D relief:
- The production and distribution of goods and services
- The cost of land
- Payments used towards patents and trademarks
- Capital expenditure
6. How do I make an R&D tax relief claim?
CT600 – you can claim R&D relief by entering the total qualifying expenditure on the full Company Tax Return form CT600.
Backdated claims - if your company has been undertaking qualifying R&D and has not yet claimed R&D relief, you can make a claim for the past two years.
7. How do I calculate my R&D tax relief claim?
Step 1: Calculate your allowable expenditure
In the example below, the total qualifying expenditure is £238,950.
Stage 2: Convert the allowable expenditure into an R&D tax relief figure
How we can help
Buckingham Capital Consulting is a leading international payment and e-money regulatory consulting firm. We can advise on your FCA license applicability, application preparations and management. We are able to advise you on the best course of action and strategy based upon your business plan and financial product or service. We can help you with licencing, R&D claim, compliance and related services.
1. We manage the claim on an end-to-end basis for you
This means that we will fully prepare your claim for you and manage communication with HMRC on your behalf.
2. We have over 10 years of experience and expertise
This means that your claim will be handled by experts who specialise in R&D tax claims.
3. Director-led service
Your point of contact will be with an R&D expert at the director level.
4. You will only pay us if your claim is successful
5. Fast and efficient claims process
The average R&D claim settlement time is 4 weeks