Is your business producing new or improved products and services?
Under the small and medium-sized enterprise (SME) scheme, a company can receive a super deduction against its taxable profits or receive a cash rebate.
Research and Development (R&D) Tax Credit provides a legitimate income stream for innovative and growing businesses. Spending £100,000 on R&D activities could provide a tax benefit in excess of £43,000 to the business. Scale that up and the sums could be considerable.
The scheme was first introduced in 2000 to encourage UK business to spend time and money on developing new or improved products, moving away from being primarily a service industry to one based on innovation.19 years on and the uptake has been poor due to uncertainty of eligibility. Government statistics suggest that only around 20% of all eligible UK businesses are currently claiming R&D Tax Credit. The principles behind claiming are straightforward but widely misunderstood by business owners and their advisors, which may suggest why they don’t currently take advantage of this financial help.
In many minds, the mention of R&D conjures up images of lab technicians in white coats testing and smashing things up. This is rarely what R&D activities look like. Do you innovate and improve the way something works or is made in your business when doing this does the outcome lack certainty at the outset? Business owners must ask themselves these 2 key questions whenever they start a new project or round of investment, to establish if what they are doing qualifies for tax credits. If so, you might be doing some R&D without even realising it.
Once your R&D activities have been identified, claims can be made for the current financial year, along with the previous one too. If you are nearing a year-end, it is worth reviewing your R&D status because you will lose the ability to claim the earlier period. HMRC generally turn the claims around in as little as 12 weeks, which increases the incentive to get claiming now.
If your business doesn’t meet the criteria to be an SME it may fall into the large company scheme instead, known as RDEC. On the surface, it looks complex but to a trained eye, it isn’t.
R&D Tax Credit applies to the running costs and some consumables of the business. They can be claimed in addition to R&D Capital Allowances which apply to capital purchases of certain assets held and used by the business.
If you are unsure which scheme you can claim under, your eligibility, what costs qualify and how to go about making claims, contact us at Barth Consulting for more information.