Our team of R&D tax credit specialists has developed a comprehensive guide that serves as a vital resource for businesses aiming to capitalise on the potential of research and development tax relief. By delving into the intricacies of these credits, the guide offers valuable insights to diverse audiences, including entrepreneurs, business leaders, and decision makers. The eBook covers essential aspects such as eligibility criteria, qualifying R&D activities and costs, navigating the claim process, and more. It unravels complex tax incentives and empowers you with actionable insights to make well-informed decisions regarding your R&D tax claims.

1. Everything you need
to know
R&D Tax credits
A Step-by-Step Guide
Learn how to capitalise on the R&D Tax Credit Initiative
to boost your financials and fuel innovations.

2. Contact Alexander Clifford
Our Success Stories
Frequently Asked Questions (FAQs)
Table of Contents
Introducing R&D tax credits
The schemes for R&D tax credits
Qualifying projects for R&D tax credits
R&D claim process
01
05
03
07
10
08
02
06
09
04
Eligibility for R&D tax credits
Applying for R&D tax credits
Qualifying expenditures

3. The R&D tax credits serve as governmental incentives formulated to foster and
facilitate R&D activities carried out by businesses operating within the UK. The
initiative by the UK government was first introduced in 2000 to encourage small
and medium-sized companies to invest more in R&D activities. A separate
scheme known as the Research and Development Expenditure Credit (RDEC)
was introduced in 2002 for large companies. This opens the window for
businesses to stretch the scope of their R&D endeavours and enhance
operations to fuel growth, all while alleviating concerns about R&D expenditures.
What are R&D tax credits?
R&D Tax Credits
at a glance
The development of new or improved products, processes, services or even
the advancement of existing ones
Overcoming technical challenges or uncertainties to achieve scientific
advancements
Systematic investigation or experimentation throughout the process
You can apply for R&D tax credits to claim cash refunds from HMRC or enjoy
corporation tax reductions on qualifying R&D expenditures if your business is
engaged in:
The dynamics of these activities may vary based on the industries considering
the broad horizons of R&D.
How do tax credits work?

4. Simply put, if your business is involved in developing new or improved products,
processes, services, or advancements, overcoming technical challenges, and
conducting systematic investigation or experimentation within technological fields,
you may be eligible to apply for R&D tax credits.
The R&D activities conducted with the aim of
enhancing the performance, reliability, quality
and functionality of a product or software.
The unpredictable results that may arise during the
development of a product or software, including the
associated processes.
The need for a trial-and-error phase with the
intention to overcome technological
uncertainties.
The R&D activities must fall within the domains of
engineering, physical sciences, biological sciences,
or computer science.
PERMITTED PURPOSE
TECHNOLOGICAL UNCERTANITY
PROCESS OF EXPERIMENTATION
TECHNOLOGICAL IN NATURE
0 1
02
0 3
0 4
The Four Criteria For R&D Tax Credits
The qualifying activities for R&D vary across industries, considering the broad scope of
possibilities in their respective field. In order to ascertain eligibility for R&D tax credits,
companies need to follow a four-criteria model, commonly referred to as the four-part
test. This model offers a more precise perspective and helps determine whether a
company qualifies for the tax credits.
What counts as R&D?

5. Yes
01
No
Has the company engaged in any qualifying projects
over the past two years?
Yes
02
No
Yes
03
No
Yes
04
No
Yes
05
No
Yes
06
No
Eligibility checklist for
R&D tax credits
The checklist is designed to evaluate your eligibility for claiming R&D tax relief. As you
read each question, simply choose "yes" if you agree or "No" if you disagree with the
statement.
YES / NO
Did you identify any technical uncertainties at the
beginning of the project that, if resolved, would result in
a significant scientific or technological advancement
within the market?
Does the project require knowledge or expertise that is
not commonly available, and necessitate a solution
that can only be derived by specialist(s) working on the
project?
Are the eligible costs inclusive of expenses related to
staff, agency, subcontractors, software licenses, and
consumables, excluding dividend payments associated
with the company?
Are these costs reflected in the company's Profit and
Loss account? Claiming R&D tax relief on fixed assets is
not possible, but under exceptional cases, there is a
possibility to reclaim R&D tax relief on specific intangible
assets.
Do you have the necessary documentation to support
your R&D tax credit claim? This may include technical &
financial reports, project plans, technical specifications,
research notes, testing records, and other relevant
documentation.
These questions are not exhaustive and only outline a brief overview of
eligibility criteria. You may require additional checks to be fulfilled,
depending on the scope of the project or qualifying activities.

6. Processes reengineering to enhance
efficiency in operations
Designing and developing new
innovative products
Designing cost-effective and innovative
operational processes
Designing, developing, and testing
product prototypes
Development of improved or efficient
products
Advanced product development using
computer-aided design (CAD) tools
Development of unique computer
numerical control programs and
programmable logic controllers
Designing and development of
innovative manufacturing equipment
Prototyping and three-dimensional solid
modelling
New techniques or integration of new
materials to improve product
performance and manufacturing
processes
What are the types of qualifying projects
for R&D tax relief?
Tailored software or applications to
run new computer hardware
Tailored software to run on devices
with pre-installed operating systems,
such as GPS, mobile phones, and
tablets
New or advanced methods of
capturing, transmitting, manipulating,
and protecting data
Software or applications to cater
needs of new projects
Tools to extend the functionality of
application software programs or of
an operating system
Extensions to database software,
programming languages, or operating
systems
Software development tools, such as
data across platforms, image
processing or character recognition
Advanced data management
techniques, such as new object
representations and new data
structures
It is imperative to understand which activities or
projects can involve businesses in R&D endeavours to
capitalise on R&D tax relief. If the technical team faces
challenges in overcoming technical obstacles, finding
solutions, or harbouring concerns about technical
uncertainties, the project probably qualifies for R&D tax
credits.
Here are a few examples of qualifying
projects
Products & Process Software
" Due to the distinct dynamics within each industry, projects
can exhibit variations depending on the specific nature and
scope of the work involved. "

7. Carrying out R&D activities is evidently associated with expenses also known as
Qualified Research Expenses (QREs) that companies incur in order to achieve
innovations. Most of these costs fall under the category of R&D expenditures, which
include staff PAYE costs/pension contributions, subcontractors’ costs, consumables,
software purchases, travel costs, and utility bills.
Be any type of company, other than limited liability partnerships (LLPs) in the UK
that is subject to Corporation Tax
Have carried out qualifying R&D activities
Have spent money on these projects in the UK
The legislation governing R&D tax credits has intentionally cast a wide net,
encompassing diverse sectors such as Information Technology (IT), construction,
manufacturing, renewable energy, engineering, and more. Its broad spectrum
ensures that innovation across various industries can qualify for these credits. In
order to be eligible for the R&D tax credits, you must:
It’s important to note that even unfinished or abandoned projects that meet the
criteria can still be eligible for claiming R&D tax credits.
Don’t let them go to waste — they could still be the source of your financial stability
and future prospects of growth.
What are the qualifying R&D expenditures?
Who can claim R&D tax credits?
R&D is fueling innovation and growth in almost all industries: Information Technology
(IT) drives advancements in emerging technologies, manufacturing focuses on
cost-effective operations, construction adopts advanced safety measures,
renewable energy seeks sustainability, engineering delivers reengineered solutions,
making it applicable to these sectors and many more.
Who qualifies for R&D tax credits?
R&D tax credits are specifically intended to assist companies engaged in trial and
error for innovations and advancements. This implies that expenses related to the
production, distribution, or creation of goods and services resulting from R&D work
cannot be claimed. Additionally, expenses such as rent, land, and patent creation
are also ineligible for claiming.
What costs don’t qualify for R&D tax relief?

8. The SME scheme is designed for small
and medium size companies with less
than 500 staff, a turnover under
€100m, and a balance sheet total
under €86m.
The Research and Development
Expenditure Credit (RDEC) scheme is
utilised by larger companies with staff
headcount over 500, a turnover of
€100m or more, and a balance sheet
total of €86m or more.
SMEs trading at a profit or loss can calculate their entitlement based on the
R&D enhancement. The R&D enhancement is calculated at 86% of the
qualifying expenditure which is then added back onto the qualifying
expenditure to give you the enhanced expenditure (186%).
Entitlement Payable - If the normal taxable profit/trading loss is lower than
the R&D enhancement, it leads to a trading loss after R&D. In this case, the
surrenderable loss will be a loss after trading relief, and the entitlement
payable will be calculated at 10% of this amount.
Corporation Tax Refund - If the normal taxable profit/trading loss exceeds the
R&D enhancement, it leads to a trading profit after R&D with no surrenderable
loss. In this case, the entitlement payable will be calculated at the Corporation
Tax rate of 25% of the R&D enhancement. This can result in a Corporation Tax
reduction or refund if the tax has already been paid.
Large companies can receive a tax credit of 20% on their qualifying R&D
expenditure under the RDEC scheme.
The initiative covers two schemes for claiming R&D tax credits and the given rates
apply to accounting periods beginning on or after 1st April 2023.
Which R&D tax credit scheme is
right for me?
SME Scheme RDEC Scheme
What are the rates of R&D tax credit
schemes?
” The rates of R&D tax credits heavily depend on the
specific R&D scheme and the context of your
company. ”
These rates are subject to change based on the ever-evolving legislation by
the Government, so it’s advisable to consult with R&D tax credit specialists
for the most up-to-date information on R&D Schemes.

9. Description
Company Revenue
Company Costs
Pre-tax Profit
The rate of R&D tax credits for profit-making SMEs translates to a benefit of up to 25%
on their R&D expenditure.
Example of a profit-making SME
Amount (£)
R&D eligible costs
R&D Allowance (86%)
Enhanced R&D Expenditure
(186%)
Reduced Corporation Tax
(25%)
Corporation Tax Saving
Corporation Tax (25%)
Reduced Pre-tax Profit
(£400K - £258K)
900,000
500,000
400,000
100,000
300,000
258,000
558,000
142,000
35,500
64,500

10. Company Costs
Pre-tax Loss
R&D Additional Relief (86%)
Enhanced R&D Expenditure
(186%)
Increased Pre-tax Loss
(£100K + £258K)
R&D Eligible Costs
500,000
(100,000)
300,000
258,000
558,000
(358,000)
Description
Company Revenue
Loss-making SMEs have the option to surrender either the lower amount between
the enhanced R&D relief or the taxable losses incurred during the period. By
surrendering these losses, the company can receive a cash credit in the form of
a tax credit payable, currently set at a rate of 10%.
Example of a loss-making SME
Amount (£)
R&D Tax Credit Payable
400,000
35,800
Lower of enhanced R&D expenditure
or trading loss (after including
additional R&D tax relief) x 10%
11.93% of R&D eligible costs
Calculate your estimated
R&D tax credits now

11. CHOOSING THE PROJECT
Successfully filing an R&D tax credit claim requires meticulous efforts to consolidate all
the necessary information demanded by HMRC, aiming to maximise the potential
outcomes. Below are a few key steps that, when followed accurately, can facilitate the
submission of an R&D claim application.
To begin, you need to determine the specific projects for which you will be making
claims. Each project must adhere to HMRC's criteria in order to qualify for R&D tax
credits.
How to apply for R&D tax credits?
DECIDING THE RIGHT SCHEME
You need to determine whether you fall under the SME or RDEC scheme by analysing
factors such as the size and financial situation of your business, along with other
relevant considerations.
ESTIMATION OF YOUR CLAIM SIZE
You need to calculate the aggregate of the eligible costs and qualifying
expenditures accumulated by the projects included in your claim. This calculation
will provide you with an estimation of your R&D tax credits.
WRITING THE TECHNICAL NARRATIVE
A technical narrative is a summary of your project's scope and development,
typically spanning two to five pages. It highlights any uncertainties or challenges
encountered during the work. It is optional but provides an opportunity for you to
explain your work to HMRC, adding value to your R&D claim.
COMPLETING CT600/CT600L
It is now time to complete your Corporation Tax form, also known as CT600/CT600L.
Your financial calculations must be included in this form.
FILING YOUR R&D CLAIM
All you need to do now is organise your technical narrative along with the CT600 to
submit your claim to HMRC. You can either do it yourself or seek assistance from
R&D tax credit specialists. The upside of engaging an R&D claim specialist is to
dwindle the chances of HMRC inquiries and maximise the outcome.
HOW CAN WE HELP?

12. Our R&D Claim Process
We'll gain your authorisation via our client instruction form/NDA.
This will enable us to discuss your technical activity along with
your current tax position.
We'll evaluate your Profit & Loss (P&L) statement whilst facilitating
your technical call. This will help establish if your case is plausible
from a technical and financial perspective.
Provided our experts are happy your case will qualify, we will then
gather all of the required technical information and financial
documentation to support your case.
At this stage, we'll run your case through a very stringent in-house
compliance procedure prior to submitting your reports.
Your case will be submitted to HMRC.
YOUR AUTHORISATION
TECHNICAL SCRUTINY
INFORMATION & DOCUMENTS GATHERING
IN-HOUSE COMPLIANCE
APPLICATION SUBMISSION
Our team stays in constant dialogue with HMRC's offices and uses
a very systematic approach to ensure there is a minimal delay
with your repayment.
POTENTIAL OUTCOME

13. You can reclaim your research tax credits for a period of up to two years after the
end of your accounting period. It is highly recommended that you include all eligible
qualified research expenses (QREs) that were incurred within the period you are
claiming prior to the conclusion of the two-year window.
How to calculate R&D tax credits?
There are R&D tax credit calculators available online
specifically designed to simplify the complex process of
determining your eligible tax credits.
With just a few inputs, these calculators swiftly and accurately
evaluate your estimated R&D expenditures and applicable tax
incentives. They eliminate the guesswork of how to calculate
R&D tax credits by providing precise estimates, helping you
apply for R&D claims with confidence and maximising your tax
benefits. Try our R&D tax calculator for free.
R&D tax credits in the UK offer significant financial benefits to businesses. The initiative
provides a valuable source of funding to support the R&D initiatives for UK-based
companies. SMEs can potentially claim a higher tax relief rate than larger companies.
Essentially, R&D tax credits fuel companies’ financial resources, encouraging
increased R&D activities across industries and ultimately contributing to the growth of
the UK economy.
What are the benefits of R&D tax relief?
How far back can you claim R&D tax credits?
How can we help maximise your R&D tax
credits claim?
Our team of experienced R&D tax credit specialists is well-versed in the ever-
evolving governmental regulations, grants, tax incentives, and funding opportunities
available to companies across various industries within the UK. And to ensure you’re
always informed and well compensated for your R&D claims, Alexander Clifford is
here to provide the support and guidance you need to stay ahead and succeed. We
are proficient and versatile in the R&D claim process, boasting a 100% success rate
with HMRC. With our best-in-class expertise, we can help you accurately and
precisely claim R&D tax credits based on the latest guidelines.

14. The team at Alexander Clifford (Ben, Jamie,
Josh, Andrew) have been incredibly helpful
and professional in guiding us through our R&D
tax credit claims. Their knowledge of the rules
and process has undoubtedly saved us much
time in preparing and submitting our claims.
A pleasure to work with.
As my company had been involved in research
for many years I had intended to claim R&D tax
credits. However the process looked time
consuming and complex. The team at
Alexander Clifford patiently and efficiently
guided me through, to make
a successful and worthwhile claim.
Dealing with Alexander Clifford for my R&D tax
credits was a breeze and pleasure from start to
finish. Their team are amenable, extremely
knowledgeable and professional, and their
claim process was very fast and efficient. I
would highly recommend them to any company
looking to take advantage of the scheme and
we're very much looking forward to working
with them again in 2023. 5 stars all round.
Our Success Stories
TESTIMONIALS

15. Frequently Asked Questions
(FAQs)
The Government created the research
& development legislation as an
incentive to encourage businesses
that are developing new or
appreciably improving existing;
products, processes, systems, and
materials – anything that contributes
to the growth of the economy.
Whenever an application for an R&D
claim is submitted, it is sent to the
regional departments of HMRC, where
it is scrutinized along with the
submitted reports. The application is
then evaluated to determine whether
to approve, query, or reject the claim.
In short, an accountant specialises in
managing your accounts, whereas an
R&D tax claim specialist is highly
knowledgeable and skilled in identifying
eligible R&D activities for tax credit
purposes and can increase your chances
of receiving benefits from your R&D
claims.
To elaborate further, assuming you have
a qualified accountant, who handles
everyday purchases and typically has a
wide-ranging workload that includes
managing your accounts and
addressing general business matters.
By contrast, R&D tax claim specialists
focus exclusively on R&D applications,
which means they stay up-to-date with
new legislation, industry standards, and
technological advancements. They pride
themselves on their ability to develop
technical narratives and financial reports
that accurately reflect the rules and
regulations established by HMRC’s
Consumer Tax Act 2009. As a result, they
can support you through the R&D claim
application process more efficiently than
an accountant.
Got questions? We’ve got answers… here, you’ll find frequently asked questions (FAQs)
and common concerns for R&D tax credits. We try our best to answer every possible
question that you might have.
What is HMRC's role in this process? What is the difference between an
accountant and an R&D tax
specialist?
Are R&D tax credits government
aid?
Yes! However, if you have already
received a State Aid grant for your
project, it’s possible that it could
impact your claim. Therefore, it’s
advisable to check with your grant
provider.

16. At Alexander Clifford, we understand that you want to invest in a service that will
deliver results without breaking the bank. That’s why we’re proud to offer a ‘No Win,
No Fee’ basis for all our services.
After successfully identifying an R&D claim, we only charge 25% of your service
entitlement, which is lower than the industry average. If we don’t identify an R&D
claim, we won’t charge you anything at all. With our ‘No Win, No Fee’ approach, you
can rest assured that your application is completely risk-free.
Are there any additional costs & or a minimum fee?
That will completely depend on the situation and context of your company. Please
explore other FAQs related to SMEs and Large companies.
How much R&D tax credits can I claim?
The amount you can claim for your R&D activities depends on the size of your
company.
You are classed as an SME if you have less than 500 staff, a turnover under €100m,
and a balance sheet under €86m.
Profitable SMEs can benefit from an enhanced deduction of 86% on qualifying R&D
expenditure, in addition to the standard 100% deduction. This means a total
deduction of 186%.
Loss-making SMEs can claim a tax credit worth up to 10% of the surrenderable loss,
which can be used to offset against other taxes or received as a cash payment.
Large companies having a staff headcount of over 500, a turnover of €100m or more,
and at least €86m or more in gross assets can receive a tax credit of 20% on their
qualifying R&D expenditure under the RDEC scheme.
Are R&D tax credits rates different for sme and large companies?
What happens if I make a mistake in
my claim?
Making errors in your claim can result in
an inquiry from HMRC. That's why it is
crucial to thoroughly review and
double-check your claim before filing.
Inaccurate or inconsistent numbers are
significant indicators for HMRC which
can raise potential concerns.
Can an unsuccessful project qualify
for R&D tax credits?
A project does not necessarily have to
be successful to be eligible for R&D tax
credits. According to HMRC guidelines,
the project should involve significant
challenges, and failure, even after trial
and error, can be an indication of the
project's ambitious nature.
If you are still in search of further information that has not been addressed
here, please refer to our FAQs for more detailed information.

17. We, at Alexander Clifford, have built a strong reputation for our ability to
uncover and evaluate innovative companies that stand to benefit
significantly from the R&D tax credit initiative. Our team of experienced
R&D tax credit specialists is well-versed in the ever-evolving governmental
regulations, grants, tax incentives, and funding opportunities available to
companies across various industries. By staying abreast of the latest
developments, we ensure that our clients gain a competitive edge by
capitalising on the R&D tax credit incentive tailored to stimulate growth
and innovation.
Who we are
R&D tax credit specialists
Book a free
consultation
alexanderclifford.co.uk
Clippers House, Clippers Quay
Manchester, M50 3XP
0161 457 8101
hello@alexanderclifford.co.uk
" Our aim is to unlock the potential of your innovative ideas
by offering support and guidance to claim the R&D tax
credits you deserve. "