R&D Tax Credit Claims
Are you part of the 68.5% of Businesses that miss out on Research & Development Tax Relief each year? Our panel of R&D Tax Experts can help.
R&D tax claims are a Government incentive that rewards UK companies for investing in innovation. They are a valuable source of cash for businesses that can help accelerate research and development and ultimately promote their growth.
Your company can receive cash credit or a lower tax bill, or a combination of the two. If your company is spending money on developing new products, processes or services, or even simply enhancing existing ones, you might be eligible. Find out if you qualify for R&D tax credits today.
What is Research and Development Tax Relief?
R&D Tax Relief is a government scheme offering tax relief to UK based companies. It is a Government reward for organisations that invest in innovative projects or/and services, which lead to an advancement in their field of operation.
What are R&D Tax Credits?
In the UK, many businesses thrive on innovation to drive the economy forward, but not many know about R&D tax credits.
Innovations are not cheap ventures and they require a lot of money that could come from tax relief, funding, grants, hand-outs or the individual businesses. A lot of the money goes into experimentation research and development (R&D).
The UK Government helps to finance these innovations through research and development tax credit. R&D tax credits incentive makes it easier for companies working on innovations to complete their processes and embark on any new ones they may have. Innovations could be either introducing new products into the company/market, or re-inventing the existing products to make them better.
It is however challenging for companies to claim R&D tax credits.
One of the reasons is that many of the companies do not know if they qualify for the tax relief or not.
Technology and innovation make up most of the research and development activities that are eligible for R&D tax credit. It is therefore paramount that when claiming for R&D tax credit that the required evidence is provided to show eligibility.
The government definitely encourages many companies to take up innovation processes. There is however a very big difference between real tax reliefs that encourages innovations and grants, hand-outs and funding to every organisation that comes up and claims to develop new services and products.
R&D tax credit specialists check if your company’s innovations qualify for R&D tax credits.
After that, it gets easier to quantify the financial benefits that come with R&D credit tax after submitting your claim.
Who Is Eligible For R&D Tax Credits?
Another question that many people ask is who is eligible for the R&D tax credit relief. Any company that pays Corporation Tax is eligible. These are usually Limited companies. The company should have qualified people and subcontractors carrying out the development of the services, processes and products. These people understand the uncertainties and unpredictability that come with innovations and therefore qualify for R&D tax credit relief.
To become eligible, you must meet the following criteria:
. Your company must be subject to corporation tax and be in the UK
. You cannot be in liquidation or in the administration
. The activities you are undertaking must be research and development based
. You must have spent some money on the R&D activities you are doing
. You must be a going concern
Some companies however have other activities such as subcontracting and grants. While some of these are included in the activities that are eligible for R&D, not all of them qualify. To find out which of these activities qualify, you need professional advice before you prepare your claim that our panel can give readily.
Looking for a specialist guide for your sector? Find it below.
- Audio And Visual
- Building Technologies
- Commercial Printing
- Creative Digital And Media
- Food And Beverage
- Health And Wellness
- Manufacturing and Engineering
- Motor Racing
- Software Development
- Web Development
Don't see your sector listed? While the sectors above are the most popular sectors for claiming R&D Tax Relief, as long as you meet the conditions for claiming our panel of expert R&D Tax specialists can help you.
What Are The Conditions Required Of An SME To Make A Claim?
Just like every other company carrying out research and development activities, all SMEs that want to claim for R&D tax credit must follow the same criteria, which are
- Be within the corporation tax of the UK
Meets all the thresholds of SME which include balance sheet assets,. turnover and headcount
- All research and development activities must be for the company and not contracted
- There are no subsidies or grants received to take care of the expenditures of the R&D activities
- The company has innovative R&D activities to benefit it in future
- Be a going concern
Are R&D Tax Credits Worth All The Trouble?
Established in the 1980’s, R&D tax credits, benefits both large and small businesses in UK.
Any company that invests in any kind of innovation is eligible for R&D tax credits. This also goes for both large-scale manufacturing companies, small-scale enterprises SMEs and start-ups.
Many of the companies however fail to take this advantage maybe because they do not know whether they are are eligible for government tax relief.
Any company that spends money to develop its services and products and bring new ones into the market qualifies for R&D tax credits.
Many companies still do not know that R&D credits are the best alternatives to any grants given for development and research funding. If you have an innovation grant to carry out research and development, then you can also complement your funding with R&D tax credits.
The answer to the question on whether R&D tax credits are worth all the trouble is yes. If you are a limited company and you are spending around £200,000 on your research and development activities, then you can claim £460,000. This is expenditure for Corporation Tax calculation purposes.
What this means also is that any limited company that pays a tax rate of 20% would easily manage to offset the £200,000 spent on tax payables and offset another additional £250,000 under the R&D tax credits scheme.
This is very helpful especially for companies making losses and for start-ups.
How To Get R & D Tax Credits
If your company qualifies for R & D Tax Credits, it can be used to reduce your tax liability or increase taxable losses.
If your business is undertaking R&D activity in relation to a specific project (even if the project is unsuccessful in the end) and the R&D activity meets the definition of qualifying R&D, then you could be eligible for this additional tax relief.
The definition of qualifying R&D is purposefully broad. Whatever the size or sector of your company, if your company is taking a risk by attempting to ‘resolve uncertainties’, then you may be carrying out qualifying activity.
If these conditions apply to your project, you can claim R&D tax credits on day-to-day costs and qualifying expenditure, including costs for staff, subcontractors, materials, software and utilities.
Relief can be as much as 230% of qualifying R&D costs if you are a small or medium-sized enterprise.
How Much Can You Claim?
If you fall under the definition of a small and medium-sized enterprise (SME) you can deduct an extra 130% of qualifying costs from annual profits, in addition to the normal 100% deduction – making the total deduction 230%
If the company is loss-making you can claim a tax credit worth up to 14.5% of the surrenderable loss.
Large companies can claim a Research and Development Expenditure Credit (RDEC). The RDEC is a tax credit for 11% of your qualifying R&D expenditure.
What Is “Qualifying Activity”?
- Creating new products, processes or services.
- Changing or modifying an existing product, process or service.
- Activities aimed at obtaining new knowledge.
- The search for alternatives for materials, devices, products, processes, systems or services.
What Is An Example of an R&D Tax Claim?
XYZ Ltd had annual profits of £200,000 and qualifying R&D expenditure of £65,000 in the financial year 2016/17.
How much R&D relief do they get?
Qualifying R&D expenditure identified by our partner specialists - £65,000
Deduct from annual profit – £200,000 – £65,000 = £135,000
Additional R&D Relief – £65,000 x 130% = £84,500
Revised taxable profits for 2016/17 – £135,000 – £84,500 = £50,500
Total R&D Credits: 230% - £65,000 + £84,500 = £149,500
Previous Tax Payable (19%) – £38,000
Revised Tax Payable (19%) – £9,565
What Is The Claims Process For An SME?
R & D Tax Relief claims are handled by HMRC.
However, the claim starts with a complete review of your accounts to calculate your potential claim. We recommend using a specialist team like our partners.
The actual relief is applied for by completing a section within your CT600 which is your Company Tax Return. If the Company Tax Return has already been submitted it is possible to file an Amended Company Tax Return.
How Far Can I Go Back?
It is possible for us to go back two accounting periods. Albeit our experts recommend that a report is produced fully justifying the technical advances made and the reasons for the retrospective claim.
How Long Does It Take?
Providing the R & D Tax Relief claim contains all supporting evidence, once submitted to HMRC, they will usually process the claim within 4 to 6 weeks.
HMRC give priority to claims that result in a tax credit payable. The good news is that HMRC has an internal target to hit and therefore processes these claims within 28 days. This is subject to any enquiries being raised.
Will I Get An Inspection?
Most first time claims are looked at by an Inspector from a specialist HMRC R&D unit.
At RDTaxCredit.org.uk our specialist panel will always submit a full detailed report, sufficient detail. This will reduce the chances or any enquiries being raised, albeit even this does not guarantee a smooth claim first time round. The important thing to consider is that our partners have an excellent working dialogue with HMRC ensuring any enquiries raised are answered swiftly and correctly.
How We Can Help
The ClaimExpert's panel help companies across all sectors with claiming R&D relief, leaving them with more cash to re-invest into their business.
Our Partner Group of Chartered Tax Advisers ensures you have a robust claim that identifies qualifying R&D and the associated costs.
They can assist in preparation of the R&D claims and submission of the claim to HM Revenue & Customs.
They handle the R&D Claim from start to finish & they produce the technical report on your behalf that helps R&D Tax inspectors understand your work and approve the claim
If you’re involved in the innovation of new or existing products or services, you may be eligible to make a claim.
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