26 Feb 2018 3:32 PM
R&D is still an under-utilised relief and many businesses are not aware that they could be eligible. There are many misconceptions; that it is only applicable for traditional ‘science’ led sectors; that it’s too complex and time consuming; and that it is only for a narrow range of R&D activities. There is a general lack of knowledge of how R&D Tax Relief works, and businesses may often be overlooked for claims.
- If you own a small or medium sized company (SME) which is in profit, you can recover up to 43.7% of your annual expenditure. This means if you spend £100,000 on R&D qualifying activities, your net cost is only £56,300.
- If you are not quite at the revenue-generating stage and do not pay Corporation Tax you can still receive a tax rebate. You could be able to recover up to 33.35% which means your relief would be close to £34,000 if, again, you spend £100,000 on R&D each year.
- If you are a large company you could claim up to 9.72%; this means if you spend £100,000 a year you could recover £9,700.
- R&D tax credits can extend to R&D work that you subcontract to a third party, not just R&D work you undertake yourself (it’s worth bearing in mind that subcontracted costs that usually do not qualify include graphic design, front-end web development, market research and PR).
- The relief is not just meant for traditional 'science-led' companies. It is available to every industry as long as you can prove you are actively involved in researching and developing new ideas and innovation (we’ve already helped a growing number of clients ranging from food & drink companies to the designers of bespoke website applications).
- Similarly R&D tax credits aren’t limited to the development of something brand new, you can also claim relief if you are developing a pre existing idea or improving an existing product or process.
- And the research and development you are claiming for does not have to be a success, it just needs to have been undertaken and undertaken to achieve a technological advancement.
- Your R&D activity doesn’t have to have taken place inside the UK.
There is vast potential in the application and benefits of R&D tax credits. As is often the case, the detail has been stretched across hundreds of pages of legislation and guidance which makes the complexity of making a claim off-putting.
We've worked successfully with businesses, helping to identify areas where they have a claim and managing the complex process on their behalf. We also liaise with HMRC to ensure that clients receive the correct tax relief due to them, promptly. Our clients tell us that the best things about leaving it all to us was that the process was hassle free and they could get on with the day to day running of their business.
If you have any questions about R&D and whether your business could be eligible to claim relief please contact me or my colleague David Gibbs.