R&D tax relief is something that many businesses who carry out eligible research and development projects fail to claim for. Whether due to an ignorance of the remuneration available or a lack of time or understanding when it comes to making a claim, some 90% of organisations are estimated to be missing out. If your business undertakes R&D work and you aren’t claiming for claiming for R&D tax relief, here’s how you could benefit from it.
What is the eligibility criteria?
As with any tax relief scheme, there is certain criteria which must be fulfilled in order to benefit from R&D tax credits. The project in question must aim to overcome a scientific or technological uncertainty, or make an advancement in a scientific or technological field. The specific advancement must be something that other competent professionals in the sector don’t have the knowledge or capabilities to make.
Projects don’t have to be complete or successful in order for your business to claim. Providing the purpose of the project and any related expenses which qualify can be proved, relief can be claimed on ongoing, abandoned or unsuccessful projects. If a project has been ongoing for up to two accounting periods previous to the present one, a backdated claim for recompense can also be made.
What schemes are open to me?
There are two schemes through which R&D tax relief can be claimed: the SME scheme and the RDEC scheme. Businesses with fewer than 500 employees and either a turnover of under £100m or a balance sheet of under £86m will fall into the SME scheme. All other companies must claim under the RDEC scheme.
What sort of financial benefit can I expect?
The amount you can claim on qualifying expenses is up to 230% of the costs. In other words, every £100 spent on research and development can lower the corporation tax paid on your profits by £230 (inclusive of the original £100).
R&D tax credits can be paid in any of three ways, depending on whether your organisation is profitable or not. You’ll either receive a Corporation Tax rebate, cash credits or an enhanced expenditure, which can be used against future profits.
How can I make a claim?
Firstly, it’s essential to ensure that the work you have carried out is eligible for relief. To do this, we recommend speaking to a specialist R&D tax advisor, who can identify what you can claim for and help you with the procedure. Qualifying costs include materials, employee wages and utilities.
Claims should be submitted to HMRC using the CT600 Company Tax Return form, along with the relevant documents that evidence eligibility of the project. Once HMRC has the necessary information, your business should receive the relief due within a few weeks.
Why not find out today whether your projects qualify for R&D tax relief, and speak to a specialist for help with your claim? It could mean the difference between a financial struggle and a comfortable year of trading, research and development.