If you own a Small or Medium-sized company have you considered making a Research & Development (R&D) claim to help reduce your corporation tax liability or potentially generate a tax refund?
Small or Medium-sized companies could qualify for tax relief of up to 230% on R&D expenditure.
R&D claims can be made in a huge variety of circumstances, whether it is improving cleaning products or improving processes in a foundry, it is the ability to move things on and overcome technical difficulties whilst doing so which indicates that there is potential for an R&D claim.
What qualifies for R&D tax relief?
It is an often held misconception that R&D claims can only be made for the development of brand new products in scientific industries. There is wide-ranging scope to make a claim not only where new products have been developed but also where existing ones have been improved in an innovative way such as making them smaller, faster, or lighter. A wide range of industries can qualify, including food and drink where the development of new, innovative recipes can also attract tax relief. Technology and software companies clearly find ways to qualify on a regular basis as they continue to innovate but any companies involved in the development of new unchartered steps forward in their particular field should consider whether they will qualify. Many companies seek to protect their development ideas through the use of copyrights but too few are then going on to make the association that an R&D claim can also be made. If you’ve got something that’s worth copyrighting then there is a good chance you’ve got an R&D claim.
From 1 April 2015 the tax relief allowable on any R&D costs incurred increased to 230% meaning that for each £100 spent on R&D activities after 1 April 2015, your company could have its taxable profits reduced by £230.
If your company has made a loss rather than being profitable, you can choose to receive your tax relief by way of tax credits which are a cash sum paid to you by HMRC. As long as you qualify as a small company you can surrender any loss arising from an R&D claim for a payable tax credit of 14.5% of that loss. If you have been making claims and receiving tax credits of this nature then you need to be aware that the amount of tax credit you can receive from an accounting period, starting on or after 1 April 2021 onwards will be limited by reference, to the total of PAYE and NIC liabilities for that period, meaning that loss-making companies may suffer a restriction on the relief they can claim.
At Ascentis, we can navigate you through the process of claiming your R&D tax credits with as much or as little assistance as you desire. We can help you interpret qualification criteria, as often many companies incorrectly rule themselves out by failing to recognise qualifying activities and costs.
If you would like to talk to one of our tax experts about claiming R&D tax relief contact us.