Many businesses are unaware that their activities qualify for Research & Development (R&D) tax reliefs which can lead to significant corporation tax savings or cash repayable credits from HM Revenue & Customs. Such activities can include making bespoke products, product development and changes to production techniques and processes.
It is staggering how many eligible businesses there are out there who are not making a claim for R&D tax credits. Part of this is due to poor or non-existent professional advice, but a key factor is a lack of awareness of the legislation with is much broader than many realise. HMRC believe that most eligible businesses are still not making an R&D claim.
The Research & Development tax credits system means that SME defined companies can claim 230% tax relief on qualifying expenditure which can be attributed directly to R&D activities, rather than a standard 100% relief.
Such expenditure includes materials consumed in R&D and staffing time expended on R&D as well as software, consultancy and utility costs incurred on qualifying activities.
In numbers terms, an R&D spend of £50,000 would result in a company being able to reduce its profits chargeable to corporation tax by an additional £65,000 (£50,000 x 130% extra relief) saving corporation tax of £12,350 at the current UK company corporation tax rate of 19%.
Relief is available for loss-making businesses by way of a repayable tax credit from HM Revenue and Customs and also for large businesses or companies part of a much larger group.
"I recall last year going to see a client about a business restructure project when we started discussing activities on the shop floor. It was evident some of the work being undertaken qualified for R&D and a claim was successfully made." Tom Wilkinson
The legislation is there to encourage growth and innovation in the UK. The types of businesses we have prepared claims for are in sectors such as:
Whilst many businesses qualifying activities can be clearly evident, it is surprising how many businesses are undertaking tax-qualifying Research & Development work without realising it.
If you believe your business may potentially qualify for R&D relief consider what your key business technical challenges have been in the past two or three years and contact either Tom Wilkinson or Ben Smith who head up our Research & Development department. We can, on a no-obligation basis, discuss whether a potential R&D claim could be made with HMRC
So far we have a 100% success rate and an excellent working relationship with the specialist units at HM Revenue & Customs and have saved companies over £2.5 million per year in corporation tax in the process.
Claiming Tax credits
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