Research and development (R&D) Tax Credits offer a huge opportunity to UK limited companies who are innovative and looking to grow and improve their businesses. If your company has conducted exercises to change processes or create new ones then we urge you to come forward and see if you can avail of this fantastic incentive from the UK government and HMRC where you can receive significant finance rewards to further projects, start new R&D projects and stimulate the economy. The Research and development (R&D) incentive can help by reducing your Corporation Tax liability or in lots of cases receive a tax credit cash injection.
The UK government launched this fantastic incentive in the year 2000 to stimulate and grow the economy by rewarding UK limited companies for their hard work and show case the innovation and talent here in the UK and where possible globally. Sadly many companies fail to claim their R&D tax credit for several reasons; perhaps they are unaware of the incentive, possibly a perceived opinion the process is lengthy or complicated or in some cases they assume they wouldn’t qualify. The issue with this is that they miss out on possibly receiving thousands which would benefit their company. If you would like to see if you qualify for past, current or future projects then please visit our website for more information pertaining to the R&D Tax Credit incentive or get in touch and contact us directly where we are happy to help with free advice on 0161 399 0152.
The team at Counting King advise, guide and assist on creating the reports necessary for HMRC to review and approve your R&D tax credit application on a daily basis. We have helped some great companies with special causes make a direct impact in the community and likewise we have assisted large UK companies understand the incentive and worked with their finance department to submit a claim and reap a real benefit. Below you will find some key points regarding the research and development scheme and how we hope it will help your company going forward.
R&D Key Point #1: All industries and sectors can apply providing you meet the really simple criteria set out by HMRC
The UK Government want to encourage all limited companies to take part and utilise this great incentive and so no matter what industry or sector your business is in, it can submit a claim for the R&D Tax Credit scheme. There is sometimes a misconception that companies who are working from a scientific or technological background are the only ones who qualify but this is simply not the case. Providing you are a UK limited company who are registered to pay Corporation Tax and have performed some form of innovative activity then you are likely to qualify. A couple of examples would be; companies in the food industry make create a new “free from” recipe or a training provider may have carried out a project (possibly with a sub-contracted software firm) to design and implement an online training platform. Both of these would have a great case to put forward and potentially receive thousands.
The whole point is that the research and development activities undertaken have the aim of attempting to resolve a specific technological or scientific uncertainty. This is also regardless of a company’s size, however there are two branches to the scheme and which one a company uses will depend on whether or not it’s classed as an SME.
To claim as an SME, businesses should:
- Be a UK limited company
- Been trading for more than 12 months
- Have 500 employees or fewer
- Have an annual turnover of no more than €100 million or a balance sheet of less than €86 million.
Larger companies meanwhile should apply for R&D Tax Credits under the Research and Development Expenditure Credit (RDEC) scheme. Under RDEC, companies can claim R&D tax relief of up to 230% of eligible expenditure. Such expenses include materials, staff wages, certain sub-contracting costs and consumables.
The good news here too is that you can still claim even if the R&D project ultimately failed in its objectives, as long as technical and/or scientific investment was made.
Benefit #2: A broad range of costs are eligible
A substantial part of the R&D Tax Credits application process is working out which costs you can claim for, as well as how you should make your calculations. This is where our R&D Tax Calculator is so useful, because it allows you to input your own numbers and does the working out for you.
Generally speaking, there are eight kinds of qualifying costs when it comes to making an R&D Tax Credit claim:
- Direct staffing costs like employers NICs and staff wages
- R&D consumables used up directly in the R&D process
- Contributions to independent research
- Externally provided workers
- Subcontracted R&D
- Clinical trial volunteers
Being HMRC, there are of course some exceptions within each category. This is why we highly recommend speaking to us so your application is right first time, as any mistakes can lead to extremely stressful (not to mention expensive) HMRC enquiries.
Benefit #3: There’s no minimum claim requirement for R&D Tax Credits
There is no minimum amount which companies need to spend on qualifying R&D projects to be able to claim R&D Tax Credits. However in previous years this wasn’t the case, and many businesses still aren’t aware that the rules have changed.
Prior to April 2012, companies needed to have spent at least £10,000 on relevant R&D activities in order to claim R&D Tax Credits. But as this no longer applies, R&D Tax Credit applications can be made even for the smallest amounts, which is great news for lower spending companies.
Benefit #4: Even companies that are loss-making can apply
We’ve found in the past that many businesses don’t claim for R&D Tax Credits simply because they haven’t turned a profit. They therefore don’t believe they are eligible for the relief, but this is incorrect.
Loss making companies are able to receive R&D Tax Credits as long as their application is approved by HMRC. How much a company will receive however depends on the regime it has used.
- Loss-making SMEs can receive between 14.5% and 33% of qualifying R&D expenditure
- Loss-making larger companies or subsidised projects can attract relief totalling 9.7% of eligible R&D expenditure.
Loss making SME businesses can also choose to not surrender the R&D loss but instead carry it forwards/backwards against profits.
We know from experience that making a claim is not straightforward for companies that have made a loss and applying can be daunting. When you come to us for guidance, our consultants will work with you to gain a full understanding of your company’s past and future tax positioning, thereby helping you to maximise the R&D tax relief benefits you’re entitled to.
How can Counting King help?
Counting King have an expert team of experienced R&D tax consultants. We will be pleased to answer any questions you may have, allay any fears and work with you to facilitate your R&D Tax Credit application to give you the best chance of a success and maximising your claim.
Sign up to Counting King today to begin your R&D claim. We help companies and accountants to claim in a fast and accurate way for R&D tax credits in 2019.
To discuss anything further, call us on 0161 399 0152 or use our contact page for excellent quality, professional advice.