R&D Tax credits and your business
For businesses in many industries, such as construction and pharmaceuticals, research and development work is part of the day job. Companies in other sectors, however, sometimes pass up the chance to carry out R&D due to lack of funding or a lack of awareness about the benefits. So why invest in research and development? Why not simply focus on the aspects of your business that are already working well? Here, we take a look at the reasons for exploring innovation.
Why do companies invest in research and development?
Investing in R&D isn’t only about showing your business to be forward-thinking and innovative. In an extremely competitive modern marketplace, companies have to revise and redevelop their products in order to stay ahead and continue to meet customer needs. Although this takes some significant funding, studies have shown a link between R&D investment and profitability.[1]Innovation, then, can be beneficial in stimulating the growth and wider success of a company.
Another of the key benefits of research and development in business is the tax relief that can be obtained from undertaking R&D projects. The government rewards companies that invest in R&D by offering tax credit that reduce their corporation tax liability by as much as 26%. The incentive is designed to encourage innovation among UK businesses and, in many cases, offers significant relief, enabling organisations to continue their R&D work.
How do businesses benefit from R&D tax credit?
The government’s definition of what qualifies as research and development is deliberately broad so that it can encompass a wide range of activity across numerous sectors. As long as your business is ‘seeking to achieve an advance in science or technology through the resolution of scientific or technological uncertainties’, your projects could be eligible.
There are two schemes, one for businesses with under 500 employees and less than €100 million turnover (the SME scheme), and one for businesses that exceed these figures. The SME scheme offers up to 25% in remuneration for R&D expenditure (25p for every £1 spent), or up to 33% for businesses running at a loss. The RDEC scheme, for larger companies, offers 12% of a company’s qualifying expenditure in relief.
What to do if you think your company is eligible
If you think your company is undertaking projects that are eligible for research and development tax credit, speak to a specialist tax advisor to confirm whether you can make a successful claim. Then gather together all the expenditure records directly associated with the project – such as material costs, employee salary details and utility bills – in order to form an accurate picture of what your total R&D expenses are. The tax specialist can then help you to calculate how much tax credit is due to you.
With extensive experience in advising businesses in a range of sectors about their R&D tax claims, R&D Tax Solutions has the expertise to help you make a successful claim. Contact us today to find out how we can assist.
[1]https://www.ecb.europa.eu/explainers/tell-me-more/html/growth.en.html
