The government’s R&D Tax scheme means businesses can recover up to a quarter of what they’ve spent on eligible R&D. But what does ‘eligible R&D’ mean, and how do you begin making an R&D Tax claim?
Luvo works extensively for SMEs in a wide variety of industry and market sectors, from software development and IT, to engineering and manufacturing. So, using our specialist knowledge of R&D Tax, we look at what eligible R&D means and answer some of the common questions about R&D Tax.
Many businesses don’t realise they are eligible for R&D Tax Credits, so if you can answer yes to 4 to 6 of these questions, there is a good chance you could be eligible to claim R&D Tax Relief:
1. Are you a going-concern Limited company?
2. Are you comparatively innovative and, if so, do you seek to create new or improved products, processes, services or systems/software?
3. Are you standing the risk / financial cost of the improvement projects or development work that you undertake?
4. Is what you are doing, advancing or leading in the sector in which you operate?
5. Are you dealing with uncertainties and using science and/or technology in seeking to overcome these uncertainties in the development work and/or improvement projects you undertake?
6. Do you experiment, undertake trials or test, produce samples or prototypes, when developing new or improved products, processes, services or systems / software?
7. Can you confirm you have NOT recently received any Grants for innovation or R&D? (this will affect which scheme you can claim under)
8. Have any R&D projects failed, i.e. not achieved the desired outcome set at the outset of the work? (As these will still qualify, as claims are activity-based rather than success-based).
Some FAQs about R&D Tax:
What are the financial benefits of an R&D Tax Claim?
There are 4 main types of tax benefit that arise from a successful claim for R&D Tax Relief – these are 1) a reduction in the amount of corporation tax that would otherwise have been payable, 2) a payable cash credit can be claimed, 3) a rebate of corporation tax previously paid and 4) an enhanced deduction that can be carried forward (and off-set against future profits).
Isn’t claiming risky and could it lead to broader tax investigations?
With specialist advice and guidance, it is highly unlikely that an enquiry would be raised on your tax relief claim. The schemes are Government imposed, introduced to encourage innovation and R&D activity within small UK businesses, therefore, if filed correctly – there should be no issues with claiming and certainly no impact on other areas of taxation.
Applying for R&D Tax Credits is a time consuming and painful process?
Not if you use an adviser with in-depth, specialist, first-hand knowledge and experience of the UK R&D Tax scheme, the do’s and don’ts, the exact information HMRC wants clearly provided to speed-up processing a claim and the financial rewards.