Your business could potentially be missing out on thousands of pounds in tax savings!
It’s nearly 20 years since the government introduced the Research and Development (R&D) Tax Credit Scheme to encourage and support innovation in all areas of business.
Even though it’s been around for a long time, many small business owners don’t realise the scheme applies to SMEs as well as large companies, or that ‘research and development’ can encompass a broad range of activities – and isn’t just about conducting work in laboratories.
Things aren’t helped either by the fact that a lot of accountants don’t fully understand the scheme, with the net result that many businesses are missing out on a significant financial benefit.
To help you understand whether your business may qualify for R&D tax credits, we invited Linda Eziquiel , Principal Consultant at our trusted business partner RandDTax to answer some key questions about the scheme. Since 2012, the award-winning company has helped over 900 UK businesses claim more than £75 million in R&D tax credits!
R&D Tax Credit Q & A
Q: What exactly are R&D Tax Credits?
A: Put simply, if your business undertakes activities that qualify as research and development under the government’s R&D scheme, you’re entitled to claim tax relief on the cost of those activities, reducing the amount of corporation tax you have to pay. Or if your company made a trading loss in the relevant period, you can claim a cash payment.
Q: Who qualifies?
A: The R&D Small and Medium Enterprise (SME) scheme applies to UK registered Limited Companies with up to 500 employees. There is also a scheme for large companies with over 500 employees – the Research and Development Expenditure Credit (RDEC), which is less generous.
Q: What sort of activities qualify as Research & Development?
A: A wide range of activities qualify, and if your company is investing in developing a new product, technology or process – either to sell for commercial profit, or to use within your organisation to improve your own products, services or systems, there’s every chance you will be eligible.
Examples of qualifying activities include:
- Developing software, hardware & apps
- Developing products, devices, gadgets & machinery
- Developing recipes or manufacturing processes
- Developing new materials
This list is far from exhaustive.
In order to qualify, whatever you are developing must create, or make an appreciable improvement to a product, technology or process, and it must involve making scientific or technological changes, or increase knowledge or capability in a field of science or technology.
Additionally, your company has to hold the commercial/financial risk.
Q: What expenditure qualifies?
A: R&D costs you can claim for include energy, consumables, wasted materials, internal labour costs for time spent on R&D and 65% of sub-contracted labour.
Since 1st April 2015, qualifying R&D costs can be enhanced by an additional 130%. The enhanced value is counted as an expense to offset against profits when calculating a company’s trading profit or loss for corporation tax purposes.
Q: How much can you claim?
A: Benefits received are in direct proportion to the investment made, and they typically range from £10,000 to several hundred thousand pounds.
Based on 2016-17 tax rates, a profitable company claiming as an SME can make a corporation tax saving of £5,200 for every 20,000 it spends on R&D, while if it made a trading loss during the accounting period it can receive a cash payment of between 18% and 33% of its qualifying costs depending on the level of its trading losses.
R&D tax credits can be claimed year on year, and retrospectively for up to 2 previous years.
Q: Should you use an R&D Tax Credit specialist?
A: You don’t have to, but using a specialist will ensure that you get your maximum entitlement, don’t make an incorrect claim, and will save you time. They’ll be up to date with the latest regulations, will take care of all paperwork, and will liaise with HMRC on your behalf.
Most R&D specialists work on a ‘no win, no fee’ model.
Q: What’s the claim process?
A: The claim process is actually quite straightforward – especially if you work with a specialist, and it’s nowhere near as onerous as applying for grant funding.
Do You Think Your Business Qualifies for R&D Tax Credits? Call RandDTax & Find Out for Free!
Finding out whether your company is eligible for R&D Tax Credits is simple, free, and requires no form filling or face to face meeting – just a short telephone interview with RandDTax.
Within 15 minutes or so you’ll know whether you qualify and if you do, you’ll have a good idea of how much you can claim.
Start Your R&D Tax Credit Claim Now by calling Linda Eziquiel at RandDTax on 0771 9439 229 for an initial chat, or email her at [email protected].