It’s not an understatement to say that businesses, across the board, have taken a hammering. Well done for surviving this far. Reduced cash flow, breaks in supply chains, staff shortages, COVID-19 restrictions and PPE requirements are just a few of the extra issues you may be dealing with.
This…this is an all good news article. If you’ve never applied for R&D Tax Credits before, give it a read. Make sure you meet the basic eligibility criteria and then consider how the regulations apply to your business.
- The downside: the rules are quite complex
- The upsides: it’s a very generous tax relief, it’s not just for science and technology companies, we’ll help with the regulations
So, is your company eligible for R&D Tax Credits?
At the very start of the process, you must meet these basic criteria:
- Limited company registered in the UK
- A going concern, not in liquidation or administration
- Pay UK Corporation Tax – it’s a Corporation Tax relief, if you don’t pay it, you can’t claim
- Your business is not a sub-contractor or part of a larger company
- You submit GAAP accounts
If you’ve ticked off everything on this list, read on to find out if your R&D projects fit the criteria and what costs can be covered.
Good to know…
Before we get into the nitty gritty, you’re probably wondering about at least one of these things:
- You can backdate an R&D Tax Credit claim up to two years, measured from the last day of the tax year the project ended.
- You either get a cash lump sum or a Corporation Tax bill reduction
- Its project dependent, not industry specific. As long as your R&D project makes a ‘scientific or technological advance’, it’ll be eligible.
- R&D Tax Credits are worth 26p for every £1.00 you spend on R&D
These deserve their own section.
Great to know:
- You can still claim the tax relief if your R&D project fails
- You can still claim R&D Tax Credits if your company is making a loss
- Our average R&D Tax claim is worth £49,000
- If we work on your R&D Tax Credit claim, you don’t pay us unless your claim is successful
Do all businesses claim the same R&D Tax Credits?
There are two different R&D tax relief schemes, dividing companies by size. You need to know which scheme is appropriate for your business.
SMEs apply for the R&D Tax Credit Scheme. Large companies use the Research and Development Expenditure Credit Scheme (RDEC Scheme).
You are an SME if you have up to 500 staff members and either £100m turnover or £86m gross assets. A company is considered large if they are over these financial thresholds and have more than 500 employees.
Is my R&D project eligible?
R&D projects are eligible if they “…seek an advance in science or technology through the resolution of a scientific or technological uncertainty….” Yes, that is nice and vague. And it’s deliberately worded to ensure that projects in different industries can qualify.
There are two key things, then lots of detailed regulation that puts people off digging further. The main things are that your project is making an innovation that’s industry-wide. It’s not just an improvement in your company that others are already doing. Secondly, the innovation is a product, process or service that’s new or makes improvements to something that already exists.
The details of project eligibility are summarised in our FAQ here.
What’s important is that companies allow R&D Tax Credit experts to take a look at what they’re doing, so none of your eligible projects or costs are accidentally missed. Lots of company’s take a quick look at the criteria and decide it doesn’t apply to their R&D projects. But a more experienced eye will pick up where the regulations can be applied to your work.
But what costs are actually included, is it just materials?
‘Consumables’ does include the physical materials you need for your R&D projects. But this category also includes other necessities, like power and water. You can include the proportion of these costs directly spent on the R&D project in your claim.
Other big costs that are eligible for and R&D tax relief claim are: staff, software and clinical trials. You need to be able to show the proportionate amounts of time spent on the eligible R&D project.
Some costs are definitely not included in an R&D tax relief application, such as: marketing, advertising, market research, legal costs and actual production of new products.
Why work with us?
You get qualified, experienced tax professionals with credentials you can check. To be clear, we’re not trying to take over all your accountancy work. We’re R&D specialists and work with your existing accountant to put together your R&D tax relief application only.
We’re got a broad view of your financial position. This means that you’ll get advice about how your R&D Tax Credit claim works with government grants, including any COVID-19 support. One doesn’t invalidate the other. You may be better off using the Patent Box or Video Games Tax Relief (VGTR) schemes. We’ll help you choose the best option for your company.
As with any expert you hire, it’ll mean you spend much less of your own time figuring out and fulfilling the requirements of the regulations. And you’ll know that it’s all done correctly. No worries about triggering an HMRC investigation with a clumsy mistake.
We have success-based fee structure. So, no upfront costs or hidden fees that crop up at the end. If you don’t get anything, you don’t pay us.
We have a 100% success rate.
This is something you can get onto yourself and your accountant may be happy to complete the submission with you. But, if you need an expert eye, give us a call on 0330 0539 112. Imagine what £49,000 would do for your business.