Pippa is the Marketing Manager for GrantTree, a team of government funding specialists who enable people and businesses to fulfill their potential. They provide access to government funding through grant and R&D Tax Credit support, advice and solutions so they can enable businesses – and the people within them – to grow. Since 2010, they’ve helped over 500 businesses benefit from more than £30m of government funding. Find out more at www.granttree.co.uk.
Investing in R&D is often essential to excelling your business, whether it’s building a new product or creating a new platform, but wouldn’t it be great to get some of those R&D costs back so you could reinvest in other areas of the business, other types of R&D or choose to splurge on a new ferrari?
R&D Tax Credits is one of the best tax initiatives out there, but it often receives a dry reception, as people may not realise its full potential. In a nutshell, R&D Tax Credits allow UK companies that have invested in R&D to reclaim up to 33% of their costs spent on innovation in the form of cash or a reduction in corporation tax. Win-win right? Let’s break it down a little more:
R&D Tax Credits: the untapped source of alternative funding
When R&D Tax Credits are mentioned, people’s eyes tend to glaze over – and who can blame them? It isn’t the most glamorous dinner-party conversion but when it comes to R&D Tax Credits, the beauty is in the eye of the beholder; once you can see past the dry government jargon and into the juicy potential that R&D Tax Credits offers, you will view them not as a dull government tax break for technology innovators, but as an excellent source of alternative funding if you have invested in complex manufacturing processes, software or technology.
The cherry on top of the cake: they work whether you are in profit or not and you can claim up to 2 years retrospectively
R&D Tax Credits work whether your business is profitable or not and you can claim up to 2 financial years historically, if you have invested in complex manufacturing processes, software or technology. In essence, they work by reducing your taxable profit and thereby decreasing your Corporation Tax, but the best part is that the scheme is designed to help companies even if they are in profit or not, so if you owe a small amount of Corporation Tax or even none, the scheme can still provide you with cash in exchange for “surrendering” some of the tax loss that has been created.
A claim consists of two sections: the financial and the technical data
There are two sections per claim: the financial and the technical data. For the financial side, typically, 15-33% of your “qualifying costs” can be recovered, which usually consist of money spent on developers, prototype materials or any outlay supporting your R&D activities. As is sometimes typical with HMRC, there is a lot of grey area around which costs are qualifying and how to best represent your projects in the technical narrative, so if you are filing yourself, be sure to know the legislation inside out or use a professional service who will know the legislation like the back of their hand.
Who to claim with? Make sure they know the legislation inside-out
It is possible to claim R&D Tax Credits either by yourself or through your accountant, but the best way is to use a dedicated R&D Tax Credit specialist. They file R&D Tax Credits day in, day out and will be able to maximise what you claim, while minimising the chances of an HMRC enquiry – which is not a fun process to find yourself in! Most of them offer a free qualifying call so if you are unsure about whether your company qualifies for R&D Tax Credits, drop one of them a line to have a chat and see if you could be filing an application.
Hopefully this article has whetted your appetite about the R&D Tax Credit initiative, and shown how simple it can be to claim these valuable incentives back, so what are you waiting for? Go forth and claim!