Research and Development tax credits are not just tax relief for high-tech and pharmaceutical or engineering companies. Our handy guide explains if your company could be eligible.
Are you missing out on Research and Development tax credits?
Lots of companies are already claiming Research and Development (R&D) relief from HMRC, but plenty miss out on thousands of pounds every year due to a lack of awareness or understanding about R&D tax credits.
This could be costing you – and stopping you from growing your business by reinvesting the credits. So it’s important to check if you can claim corporation tax relief on your innovative science and technology project.
What types of projects does it include?
To qualify for R&D relief your work must be part of a specific project to make an advance in science or technology. This often includes companies that have developed intellectual property in their products, products and systems.
Any projects that include overcoming technical and scientific uncertainty also generally fall within the definition of R&D qualifying expenditure.
Working with specialist accountants like Oscar Fairchild can bring business owners substantial Research and Development tax refunds. And we can also help you to go back up to two years from your accounting date to make retrospective claims.
How do you assess whether a company is eligible for R&D?
Oscar Fairchild work with London-based Aspen Waite to provide specialist advice for businesses on R&D tax issues. In assessing whether a company is eligible for R&D they will consider lots of different areas.
Gary Waite of Aspen Waite, a specialist advisor to Oscar Fairchild on Research and Development Tax, says: “We find that many companies are eligible for R&D tax credits but just really think this is a tax relief for high tech and pharmaceutical or engineering companies only. We act for a wide range of clients of all sizes, industry sectors and geographic regions.”
The R&D tax checklist for businesses is:
- Did you work on any specific projects in the past two years?
- Have any new systems or processes been designed and implemented recently? These don’t have to be successful ones as relief may still be available even if the project failed.
- What new systems and products, or something different in service delivery, has been established in recent years?
- What new regulatory rules have been introduced in your industry resulting in having to make fundamental operational or strategic changes?
- What makes you different from your competitors and why? What is your real differentiator and your intellectual property?
- How have you utilised IT within your business which is owned and/or specific to you?
Some projects can be ongoing as HMRC recognises that in some industries you have to be innovative just to survive. And projects can be product or service delivery in nature, or anything generally that involves overcoming scientific or technical uncertainty
How does research and development tax relief add up?
For any companies undertaking R&D they can get 230 per cent tax relief, rather than the normal 100 per cent relief on expenditure. That means an extra 130 per cent, i.e. 1.3 x the expenditure at 20 per cent corporation tax saved!
For example, for every £10,000 spent: 10,000 x 1.3 @ 20 per cent = £2,600.
So companies get an extra 26 per cent in tax back on all R&D expenditure, and the biggest cost is normally salaries and wages. Staff and directors undertaking R&D are the biggest contributors normally, and in some industries more than 50 per cent of director time has been agreed with HMRC as R&D.
In some instances companies can have their corporation tax bills completely wiped out by R&D claims, and some companies can even end up with negative corporation tax bills – receiving corporation tax rather than paying it!
This includes early stage, innovative businesses that have yet to make a profit but which are investing heavily in R&D.
What problems do companies face with R&D tax credits?
There are no major R&D pitfalls to worry about if your business is working with professional accountants like Oscar Fairchild.
A rigorous quality control process ensures only valid cases are taken on with a high likelihood of a successful Research and Development tax claim.
Get expert advice to help you get it right
Whatever questions you have when thinking about Research and Development tax credits for your business, working with Oscar Fairchild’s specialist bookkeeping and accountancy services for growing businesses makes perfect sense for business owners.
About Oscar Fairchild:
Oscar Fairchild (incorporating Redwood Clarke since 01.09.18) is an Association of Accounting Technicians (AAT) qualified accountancy & bookkeeping practice with offices in The City of London and Billericay, Essex. Offering a wide range of services including Self-Assessment Services, Annual Returns, VAT Returns, Credit Control, Payroll, Auto Enrolment Pension and Management Account services to high growth businesses across London, Essex and Hertfordshire.