Part two: your ‘what’ questions answered
It’s estimated 80% of SME’s are underclaiming the research and development (R&D) tax credits they’re due from the government — or aren’t claiming at all.
You could also be missing out on claiming back every 33 pence of every £1 you spend, which can soon mount up to thousands. The government will even reward you in tax credits for unsuccessful projects.
We’ll ensure you’re not missing out, keeping the time and effort you put into claiming to the absolute minimum. We’ll do all the heavy, time-consuming legal and compliance work so that you can get back to doing what you do best.
In a bid to make the world of R&D tax relief clearer and put money straight back into your business, we’re taking things back to basics with who, what, when, where, and why.
In the second of a series of FAQs, we simplify the answers to some common ‘what’ questions.
Q: What is R&D tax relief?
A: It’s a government incentive to encourage scientific and technological innovation in companies across the UK.
The scheme allows companies investing time and effort into research and development (R&D) to receive tax credits.
It’s been in place since the year 2000, and the government has pledged to run R&D tax credits until 2032.
Q: What does the government define as “research and development”?
A: “R&D for tax purposes takes place when a project seeks to achieve an advance in science or technology. The activities which directly contribute to achieving this advance in science or technology through the resolution of scientific or technological uncertainty are R&D”.
Or, as we like to put it:
“The development of new products, processes, software or services — or making changes to existing ones”.
If you’re doing any of the above, then you’re likely undertaking R&D. HMRC’s criteria for claiming is purposefully broad, so what qualifies may surprise you.
Q. What does my company need to be to claim R&D tax relief?
A: You’ll need to be a small or medium-sized enterprise (SME), which the HMRC defines as a company with fewer than 500 staff and a turnover of less than €100 million, or gross assets of less than €86 million.
Q. What’s the deadline for submitting an R&D tax relief claim?
A: It’s usually 24 months after the end of your company’s 12-month accounting period.
For example, if you file accounts to 31 December each year, for the accounting period ended 31 December 2021, you have until 31 December 2023 to submit a claim.
So from 1 January 2024, you can no longer claim for qualifying R&D activities from 1 January 2021 to 31 December 2021.
Q: What happens if our company is loss-making?
A: An R&D claim will increase the taxable loss. This can be carried back, carried forward, or surrendered for a cash payment at a rate of 14.5% against the enhanced 230% expenditure under the SME scheme. This can create a credit of up to 33% of the eligible costs.
Q: What happens if we already receive an R&D grant?
If your grant is classified as state aid, the expenditure is not eligible. Instead, you will have to claim under the much less generous research and development expenditure credits (RDEC) scheme.
Q. What can I spend my R&D tax credits on?
A: Anything you choose. With their R&D tax credits, we’ve seen clients pull their businesses through the pandemic, become debt-free, invest in skilled staff, and buy expensive materials for further R&D projects.
We average £54,000 per client. Every claim we’ve submitted to HMRC has been paid.
If you don’t think that you qualify for R&D tax relief, then you could be wrong. If you do think that you qualify for R&D tax relief, then you could be right.
Get in touch, and we’ll find out for sure.
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