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Politics aside, the UK Government’s response to the Coronavirus (COVID-19) crisis has been comprehensive, but incomplete. A lot of limited companies in particular and their Directors have been left behind without any support, nor much hope of it being business as usual for weeks if not months to come. Why not consider R&D Tax Credits to get what you are entitled to but reducing/removing your corporation tax and even potentially creating cash to help support your business at this time?
The UK government’s ambition is to grow Research & Development (‘R&D’) to 2.4% of GDP by 2027, to make us a global leader, from the current levels of around 1.7% of GDP. There is a lot more work to be done here. In the post-Brexit world, this will also become even more critical if the UK is to grow and attract investment.
What are R&D tax credits?
HMRC R&D tax credits were established to drive innovation and recognise UK businesses that invest in research and development of new products, processes or services (or enhancing existing ones) allowing them to invest in further R&D and growth.
Since the scheme began in 2000, £26.9bn in tax relief has been reclaimed. The average claim value for SMEs in 2016-17 was £53,876. This could really make the difference between a business continuing to trade or going out of business, and yet many companies don’t know about the scheme and may be missing out.
Do you think your business may be eligible for R&D tax credits? If so, what do you need to know? Black and White Accounting are here to provide you with the answers and help you reclaim your tax.
R&D tax credit eligibility
To qualify for R&D tax relief, work must be part of a project to make advances in science or technology and must relate this to what the company does or intends to do based on the R&D.
Your business can be in any sector but you must be liable for UK Corporation tax and have spent money on a qualifying R&D project, which:
- Looks for an advance in science and technology;
- Shows you overcoming uncertainty;
- Explains how you are overcoming uncertainty; and/or
- Shows that the problem couldn’t be easily worked out by a professional in the field
You are still allowed to make a claim even if your research project isn’t successful.
How much is the R&D tax relief?
The type of R&D tax relief paid is dependent on the size of a company. An SME (less than 500 staff and an turnover under €100 million or a balance sheet under €86m) can claim either:
- an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction; or
- claim a tax credit if the company is making a loss, worth up to 14.5% of the surrenderable loss.
Large companies can claim R&D Expenditure Credit of 13% following the 2020 Budget. This was previously 12p for every £1 spent on qualifying R&D expenditure from 1 January 2018 (11% of your qualifying R&D expenditure up to 31 December 2017).
Making an R&D tax credit claim
Claims for R&D tax credits can be made to HMRC through your Company Tax Return and you can go as far back as two accounting periods. It normally takes four to six weeks for HMRC to process.
Case Study
One of our client’s is an API-developer. They are in their infancy with high levels of investment to fund their growth and capability development. As a result of our support, they were able to claim nearly £100,000 as a tax refund from HMRC during 2018, which is critical for their very survival. This is a great example of where R&D tax credits can help innovation, investment and ultimately growth in the UK.
Other clients we help in this space are typically Marketing Agents and Software Developers. However, as long as there’s innovation, there is an opportunity to claim; we also have some construction clients who have successfully claimed.
Business advice and accounting services in Hampshire and Surrey
We specialise in providing R&D Tax Credit services to both our clients and those who use other Accountants. Whilst there are some specialists in this area, they typically charge fees based on the reclaim amount, which can be as much as 20-40% of this amount plus VAT. Rather than charge such an eye-watering amount, we charge either based on our hourly rates, or as a fixed fee, to ensure you don’t get any surprises and get maximum benefit for your hard work.
We help businesses of all shapes and sizes to grow by providing a pro-active, personal and informative accounting service as and when it’s needed.
Interested in hearing more about what we can offer you? Then get in touch with us today for a free initial one hour consultation by filling in the form on the page, calling us free on 0800 140 4644, or emailing [email protected]. We look forward to hearing from you!
