How much cashback can you get?
Many companies can claim cashback and if you've passed our Cashback for Creativity - Do I Qualify? test you are probably one of them.
But how much can you get! Read on and you should be able to answer that question for yourself.
Sharpen your pencil and grab a calculator as there are a few simple sums you need to do to find out how much cashback you could get under the UK government R&D tax credit scheme.
This page is for companies with zero to 500 employees – referred to by Government as Small and Medium Enterprises (SMEs).
First things first: have you taken our Cashback for Creativity - Do I Qualify? test to make sure you qualify?
Activities that qualify:
Things that qualify include projects and activities to research and develop new or much improved: software applications, technology systems, foodtech, agrifood tech, in fact any tech, gadgets, equipment, electronics, packaging, recipes, substances, materials, engineering designs, construction methods, manufacturing processes, bio-energy, life sciences and agricultural capabilities… and many other development activities.
The amount of cashback you could get is determined by these two things:
- How much you have spent on development projects: ‘Your Costs’.
- Your specific circumstances each year: whether your company made a Trading Profit or Loss in the relevant accounting year.
That means we can’t tell you exactly what you could get, however we can tell you the range from the minimum to the maximum amount, but first you need to estimate Your Costs.
You might have all the information you need in your head but if not you should refer to the Expenditure section in your Full Annual Accounts, or ask your book-keeper for the information.
Here’s how to estimate Your Costs:
Get some lined paper. Decide what year you want to look at - chose one of your past two accounting years and write the year start and end dates at the top of your sheet. (Claims are done per accounting year and you have up to two years from your accounting year-end to submit a claim.)
Divide the sheet into four columns likes this:
1. Item | 2. Total | 3. Portion | 4. Qualifying
First you’re going to look at costs for your Employee Wages to go into Row A
(rules are that these can be counted at 100% of the relevant portion).
- In Row A, Column 2 - jot down your total wages bill for all employees … over your chosen year (include Employer's NI and pension payments).
- In Row A. Column 3 - jot down your estimate of the portion (percentage) of all employee time/wages spent on developing things that qualify (see above for info. on Activities that qualify) including managment time … over your chosen year.
- Then do the sums to work out what goes in column 4: Total x Portion % = Qualifying.
Now you’re going to look at your Third Parties/Contractor Costs to go into Row B
(rules are that these can be counted at 65% of the relevant costs).
Think about what you have paid to third parties/contractors to help you directly with your development projects i.e. external freelancers, agency paid staff, sub-contractors, engineers, digital agencies/coders, prototyping or testing facilities, etc. (all these can be based in the UK or abroad).
- In Row B. Column 2 - jot down the total amount you paid to third parties/contractors for work on your development projects (excluding VAT).
- Then do the sums to work out what goes in column 4: Total x Portion at 65% = Qualifying.
Here's a completed example which assumes:
- For Row A: your total employee wages costs in the year were £180,000 and a quarter of those (25%) were for waged staff time spent on relevant development activities and projects, giving you £45,000 (a quarter of £180,000) as your qualifying costs in column 4.
- For Row B: your total payments to third parties/contractors for relevant activities were £100,000 in the year. Rules are that you can only count 65% of these towards your qualifying costs, which is this example would be £65,000 to go in column 4.
- Now all that's left is to do is to add together the two numbers in Column 4. rows A. & B. to get the total of Your Costs (in the above example Your Costs would be £110,000).
Here's the fun bit - use our R&D Cashback Chart to see what level of cashback you could get...
Now you have estimated Your Costs, use the chart below to read off how much cashback is available based on Your Costs. The left hand column lists costs from zero to £500K – find the number nearest to what you worked out as Your Costs and read across the row to see the Minimum and Maximum cashback amounts you could claim based on your estimates. The actual amount will be somewhere between the minimumm and mazimum depending on your specific circumstances.
Note: there are a few other costs you can count towards Your Costs, but employee wages costs and third parties/contractor costs almost always represent the lion’s share of your qualifying costs, so they are all you need to do a quick estimate of how much cashback you could get. Read more on What Costs Qualify.
Why not check your results free by requesting a second opinion? It's easy, you don't need to do any advanced preparation - just contact us and Request a Free R&D Tax Credits Telephone Assessment.
Are you ready to find out if you qualify or how much your R&D claims could be worth?