What are R&D Tax Credits?And how can they benefit your business?
Introduced in April 2000, Research and Development Tax Credits are a government incentive for limited companies who dedicate time and investment into the research and development of new products, processes and systems / services.
It is a way of reducing corporation tax liability, or where there are no profits – a payable cash credit relative to their eligible R&D expenditure. There are two schemes available to claim the relief:
1. SME (Small-Medium Enterprise) scheme, and
2. Large Company (Research and Development Enhanced Credit, RDEC)
Companies who qualify for the SME scheme will have <500 employees, <€100m Turnover, or <€86m Gross Assets.
If you’re wondering whether an application is worthwhile, in April 2015, the government increased R&D Tax incentives for SME’s, to 230% of qualifying expenditure, up from the previous 225%. In October 2016, further support was pledged by the Government to CBI, of £2bn of funding being invested in R&D by 2020.
In the UK the current average claim for an SME is nearly £60,000
Many businesses don’t even realise they are eligible for R&D Tax Credits and miss out on the huge financial benefits available to help them.
There are four main rules that can be used to assess eligibility initially, these are:
- The company is using science and or technology in the R&D work
- The company is seeking to advance or improve a product, process, service or systemy
- The company is standing the full commercial and financial risk of the R&D
- The company is seeking to overcome technological uncertainty, in order to achieve the advances
Anybody can submit an R&D Tax Claim, but to be successful and get the maximum benefit we advise that you will need experience and detailed knowledge of HMRC guidelines, which is where someone like ourselves come in…
Identify qualifying expenditure
After initially confirming eligibility, we identify qualifying R&D expenditure, according to HMRC rules. As specialists, we eliminate the chances of error i.e. including incorrect expenditure which fails to qualify as R&D – something that can raise an enquiry with HMRC if not done correctly.
Calculate qualifying costs
We calculate and maximise qualifying costs against which you can claim. Without specialist advice, there may be a tendency to overestimate / underestimate qualifying costs. With detailed knowledge of what does / does not qualify, we can save you time and ensure that you aren’t over / under claiming.
Prepare a Technical Justification Report
We prepare the required Technical Justification Report, that must accompany the R&D claim (amongst other documents). With our extensive knowledge and experience, we ensure that this is written and delivered in the way HMRC requires.
where tax saving is over £10K
where tax saving is over £150K