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What are R&D tax credits?

Research and Development, or as it’s more commonly known, R&D tax credits, are a government incentive which is designed to compensate UK companies for investing in development and innovation. R&D tax credits are a very valuable source of income for a lot of companies that wish to develop and grow their business.

Over the last few years it has become apparent to us that there is a widespread misunderstanding about what qualifies for relief. In our experience, clients think that they need a laboratory, test tubes and staff in white coats to be able to make a claim! In the first instance, clients should be asking themselves whether they produce anything innovative and unique.

HMRC state, “Research and development take place when a project seeks to achieve an advance in science or technology through the resolution of scientific or technological uncertainty.”

A number of companies invest money into developing new products, services and processes or improve the ones they currently have and these are eligible for benefits such as a cash payment, reduction of corporation tax or increase in taxable losses.

So, does your company qualify for R&D credit?

If you are a business that creates innovative products or processes, you could qualify for Research & Development tax relief.

Many people have heard the term but don’t really understand what this is and more importantly whether what they are doing would come within the regime and be eligible. R&D tax relief is designed to assist innovative companies who develop new software and products etc by either reducing their corporation tax bill or providing a repayable tax credit for companies who are not yet making profit.

What are the benefits of R&D tax credits?

R&D Tax Credits work by allowing your business to include an additional deduction in calculating its taxable profits. Real tax savings can be achieved whether your company is tax-paying or loss making.

Companies that spend developing new products, processes, and services or improve existing ones, are eligible for R&D tax relief. If you’re spending money on business innovation, you can make an R&D tax credit claim.

Even if your development wasn’t a success or it has been put on the back burner for a while after the actual  R&D, you can still claim on time you spent working on these projects.

The SME scheme has a rate of R&D expenditure tax relief as high as 230%, while the Large Company Scheme has a rate of 130% – meaning you can save a fair amount on your tax bill.

As you can see by our recommendations, we really are easy and a pleasure to work with, so If you are still unsure if your business is eligible to claim R&D tax credits, get in touch for a no obligation chat. 

Ok, so it looks like you have a claim…..Now what’s the process?

The great news is, we will do all the hard work for you, by preparing the relevant information for HMRC.

Money Spheres R&D tax specialists will claim for your two most recently-completed financial years. So if your financial year end is the end of Dec 2019, you can claim back R&D tax relief for the years ending 31st Dec 2017 and 31st Dec 2018.

It really is as simple as that.