The R&D tax relief scheme was brought in for businesses in 2000, but many are still unaware of the benefits of the scheme or how they can file a claim. This process can often seem daunting for businesses who haven’t made an R&D tax credits claim before, so we’ve broken down some of the key points you should know.
What is R&D tax relief?
The research and development (R&D) tax relief scheme was brought in by the government to encourage UK businesses to be more globally competitive in the fields of Science and Technology. R&D projects aimed towards scientific and technological advancements can be used to receive a reduction in Corporation Tax owed. Eligible projects can be anything from creating a new drug to implementing a bespoke IT process that hasn’t been created before. It can also include enhancements to existing products, services and processes.
How does R&D tax relief benefit my business?
R&D tax relief can often give businesses a much-needed financial boost.Companies making a loss can also claim, receiving a cash sum instead. This can be particularly important for small businesses in which cash flow is vital. How much you’ll receive depends on a variety of factors including the size of your business and whether you’re making a profit. However, most can claim between 8% and 33% back on qualifying costs. Use an R&D tax relief calculator to work out how much you could be owed. Many businesses even choose to reinvest their tax credits into further R&D projects, helping them to grow as a business, progress Science and Technology within their field and create a positive business cycle.
What information does HMRC need?
To maximise your chances of success, you’ll need to prepare a report to prove your project involved eligible R&D activities. It can be helpful to answer the following questions when preparing your claim.
- What was the scientific or technological advance you were seeking?
- Why wasn’t this advancement already deducible by competent professional in the field?
- What were the specific uncertainties in the project, and how were these overcome?
You’ll also need to work out your qualifying project expenditure which will include direct R&D costs for staff wages (including any external workers), consumables and software involved. You may also be able to claim for some of the utilities and capital expenditure involved if it’s directly related to your R&D project, but these claims are more complex, so seek advice.
Getting more information on R&D tax credits
You can submit your claim to HMRC yourself, but many businesses use a specialist to do so on their behalf. Making a claim for R&D tax credits can be overwhelming when you first consider it, so using an R&D expert can save time, eliminate errors and enhance your chances of success. They’ll also have the most relevant information relating to HMRC’s R&D tax relief legislation and know exactly what assessors are looking for.
Many businesses miss out on beneficial R&D tax credits they’ve earned through hard work and financial investment. Don’t be one of them!
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