Many companies are apparently still not aware of Research & Development (R&D) Tax Credits or what it could be worth to their Business. Yet for companies who use them, R & D tax credits usually become an important part of their overall financial position.
So what is R & D expenditure?
It relates to money spent on a project which contains technical uncertainty e.g.,
- Labour costs relating to management, development, technical analysis and developing manufacturing processes etc.,
- Consumables – software licences, heating and lighting,
- Supporting software.
R & D tax credits are tax breaks which work by reducing your profit and accordingly your corporation tax. The scheme is designed to help companies whether they are in profit or not. So if your company only makes a small profit, or none at all, it can still benefit by surrendering for cash some of the tax loss that has been created.
The relief for an SME can be as much as 230% of the eligible expenditure. Serious consideration should therefore be given as to whether your Company is eligible to claim this valuable relief.
So how do you know if you qualify?
If the project you have undertaken includes any element of technical uncertainty then it is worth investigating whether a claim can be made. Are there any elements of the project where you were not sure the component could be built to the required specification, or perhaps you were not sure what it would look like once built because it was evolving during the process?
Innovation – Has your project achieved something on a technical front that no other project has achieved? Cost – Have you spent a significant amount on, say, software development? If so, chances are there is an element of technical uncertainty in there.
There is no denying that this is a very complex area and that many businesses will not realise that the projects they are working on will contain an element which could qualify for R & D. Usually, the most expensive part of any project are the labour costs involved, which can be substantial. The tax savings being missed are therefore also substantial. Review your projects and get advice if there is even a small chance you feel it may qualify.
Green & Co specialise in R & D Tax Relief, if you would like to speak to one of our team, contact us on 01633 871122.