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Is your business eligible for Research and Development (R&D) tax credits?
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, £21.4bn 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 and 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.
Who is eligible for R&D tax credits?
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 tax relief?
The type of R&D relief paid is dependant on the size of company. An SME (less than 500 staff and a 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 loss making, worth up to 14.5% of the surrenderable loss.
Large companies can claim R&D Expenditure Credit of 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).
How can you make a 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.
Will R&D tax relief continue?
It’s estimated for every pound spent on R&D tax credits, between £1.53 and £2.35 is additionally spent on R&D by UK companies and the continuing year on year increase in applications demonstrates the scheme’s popularity.
However, the government has launched a consultation paper to consider capping R&D tax relief to be paid to a qualifying loss-making business to minimise the impact to genuine business claims.
That said, whilst we cannot anticipate future changes in legislation, these incentives are very good at encouraging investment, innovation and growth in the UK, which in a potentially post-Brexit world, could become even more key for our economy.
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.
Professional tax advice from Black and White Accounting
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.
Business advice and accounting services in Hampshire and Surrey
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. Call us now on 0800 140 4644 for a free initial consultation.
