ARE YOU MISSING OUT ON VALUABLE CASH?
Research & Development Tax Credits (R&D) have been available to UK companies since 2000, designed to support investment in projects carrying commercial risk with improvements in products or services. In short, it’s anything that you can classify as a “scratch the head moment” when you face that challenge and have to come up with a solution.
R&D is a Corporation Tax (CT) tax relief that may reduce your company’s tax bill or, in some circumstances, you may receive a cash credit.
The SME scheme
From 1 April 2015, the relief a company can get has increased to 230% on their qualifying R&D costs. Loss-making companies can, in certain circumstances, surrender their losses in return for a payable tax credit. Just stand back and think how generous this scheme is - the average claim is working out at a £39,000 cash refund per client!
Research and Development Expenditure Credit (RDEC) scheme
From 1 April 2015 a taxable credit is available at 11% of qualifying R&D expenditure for large companies.
R&D staff costs
Your company can claim for salaries, wages, class 1 NIC and pension fund contributions for staff directly and actively engaged in the R&D project. This covers employees who undertake ‘hands on’ R&D work and the proportion of supervisory and managerial time spent specifically directing such employees in those activities.
Some examples of R&D Activity:
- Merging standalone systems with other systems
- Developing and refining IT systems
- Trialling or testing of machinery and processes
- Trialling and testing of tooling alternatives
- Problem-solving regarding product development
- Problem-solving regarding design issues
- Development of new food products or recipes
Don’t think it applies to you? If you run a limited company and in any way develop, design, adapt, improve or customise products or services, then, yes, it can apply to you and your business. In fact, it’s hard to think of any viable, progressive and developing company which would not be eligible for putting in a claim for some form of R&D activity.
Sounds too good to be true? HMRC are keen for businesses to make a claim to reward entrepreneurial risk, as it is R&D activity in all its forms which ultimately takes the UK economy forward.
Can my accountant do this? The majority of accountancy practices don’t have the in-house expertise to uncover and effectively calculate the qualifying R&D. Also, specialist application companies, through making regular and repeated submissions, get to know what is required to make a successful application in the eyes of HMRC.
Does it take long? The process is relatively quick, taking on average around 10-15 weeks from seeing a client to a report being submitted to HMRC.
Can I leave it a few months? Making a claim is financial year-end sensitive. Claims can be submitted relating to up to two previous financial years. But why wait? That refund could be going back into your bottom line NOW. And if you wait, you may forget the deadline and lose that valuable refund.
How much does it cost? Most companies specialising in R&D tax credit applications work on a success-based fee structure.
So, what are you waiting for? Right now you could be sitting on two years' worth of unclaimed R&D tax credits, worth tens of thousands of pounds, so get claiming now!