Research &Development Tax Credits
Although R&D Tax Credits have been around since the year 2000, many companies are still not taking full advantage. This is a huge missed opportunity as claims can be worth many thousands of pounds which UK businesses often urgently need.
The relief is offered in respect of innovative work undertaken to broaden scientific and/or technological knowledge in any given field. The government’s logic behind it is that innovative companies then grow and reinvest, which benefits the wider economy.
So why aren’t people claiming?
We come across all sorts of reasons why clients haven’t claimed R&D tax relief previously. Often, it’s simply because they didn’t know the scheme existed or they wrongly believed their work wasn’t eligible. Sometimes clients say their company is too big or too small, or that their business is in the wrong field (when in fact the relief is open to any business of any size in any industry).
Many people also believe that applying for R&D Tax Credits is a massive headache and they just can’t be bothered or don’t have time. This one’s an interesting one; yes, it’s likely to be a headache if companies try to go it alone. But it’s not painful – or time consuming – if accurate recordkeeping has taken place and they work alongside an R&D tax relief consultancy such as us.
We can help you and your clients to navigate the often complex process, accurately identifying and accounting for costs and putting together a high quality narrative. It also means you can rest assured there will be no costly and stressful HMRC investigations.
R&D Tax Credits in a nutshell
Research and development (R&D) Tax Credits is a government incentive offered to UK limited companies which encourages them to invest in innovation. The scheme works by reducing a company’s tax liability or by giving a cash refund for companies that are making a loss.
When it comes to defining R&D work for tax relief purposes, the scope is incredibly broad. But it’s essentially about taking risks and spending money on making an appreciable difference to science or technology. So, if you have recently created a new product, process or service, or spent time and money on improving an existing one, then you could well be eligible for R&D Tax Credits. For SMEs this can be worth a very generous 33 pence for every £1 spent on R&D costs.
Who and what is likely to be eligible for R&D tax relief?
There are a large number of different types of R&D expenses that can be included in a claim for R&D Tax Credits. These are things like staff wages/salaries, materials, certain software and overhead costs and money paid out to subcontractors. The scheme is also open to any UK company that has a Corporation Tax liability, and you may be surprised at what you can claim for.
What’s the time limit for claiming R&D Tax Credits?
The government currently stipulates a time limit for R&D tax relief claims of two years from the end of the accounting period during which the R&D project took place. This is because R&D Tax Credits are a relief against an organisation’s Corporation Tax liability, and the deadline for amending a Corporation Tax return is generally 24 months after the company’s accounting period ended.
At C-bas, we’re here to work alongside you in helping with your R&D Tax Credit claim. To find out more about how we can help you, contact us today.