Counting the costs: What government funding for scientific research will cover?

Counting the costs: What government funding for scientific research will cover?

What Costs Can You Claim Through R&D Tax Credits?

Finding out that the government could give you some money is always great news, especially when you’re a small business to whom it makes a real difference.

And if you’re working in scientific, technological, medical or engineering research, the government can end up giving you quite a lot of money, through a scheme called research and development tax credits.

The thinking behind the scheme is that if you’re inventing or developing something that’s going to benefit society at large, the government should support and encourage that – so it gives you some of your tax back to help with the costs you’ve incurred during the research.

Working out what costs you can claim for can, however, be quite complicated, and it’s often worth seeking help from specialist accountants. The key is that the costs must relate to the research specifically.

Things you can claim for

Staff: You can claim back some of the cost of salaries, national insurance contributions, pension contributions and expenses for people who are employed to work directly on the research project. This can include work done by administrative, maintenance, clerical or security staff directly to support the project, but not work that would have been done anyway, like managing payroll. It can also include the proportion of supervisors’ and managers’ time spent overseeing work on the project.

If you hire agency workers, you can claim back up to 65% of the agency fees.

Subcontracted work: There are different rules here depending on whether you are a small or large company. For the purposes of research and development tax credits, a small company is considered to be one with fewer than 500 staff and either a turnover of less than €100m or a balance sheet total of less than €86m.

Small companies who subcontract work or use freelancers, as long as the freelancer is actively involved in the project and not just giving professional advice, can usually claim back up to 65% of those costs.

Large companies can’t claim for subcontracted expenditure unless it’s directly undertaken by a charity, a higher education institute, a scientific research organisation, a health service body or an individual or partnership of individuals (so not a corporation).

Materials, utilities and software: You can claim for materials which have been used for your research and can’t be reused, and software costs if the software was bought for the research (or a proportion of the costs if it is used partly for that purpose). You may also be able to claim a proportion of your utility bills (water, gas, electricity etc).

Clinical trial volunteers: You can claim some of the cost of paying them to take part

Prototypes: You can claim some of the design, construction and testing costs for prototypes – unless you are going to sell the prototype itself, in which case the costs you can claim will be reduced.

Things you can’t claim for

  • You can’t claim for:

      • the production and distribution of goods and services
      • capital expenditure (although you may be able to claim a separate research and development allowance on things like plant, machinery and buildings)
      • the cost of land
      • the cost of patents and trademarks
      • rent or rates
      • employment-related benefits
  • To find out more or make a claim, try this R&D Tax Calculator to see what you could be owed.

    This sponsored article was provided by Chris Surridge

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