Could you be benefiting from R&D tax relief without knowing it?
Many SMEs could be saving money via the UK Government’s Tax Initiative for Research & Development (R&D Tax Credits) but are missing out because they don’t realise, they qualify.
As experts in R&D tax relief, we have a proactive approach and offer advice for businesses of all sizes and sectors. When it comes to R&D, many small and medium-sized businesses are put off by the words ‘Research’ and ‘Development’. They can quite easily make you think you need a lab coat to apply for the incentive, but that isn’t the case…
What is R&D and why should you use it?
R&D Tax credits are designed to encourage UK businesses to invest in innovative products and services to boost the economy. Companies that qualify could be granted a 230% tax relief and even a tax refund.
If you’re a small business, you might think ‘Is it really worth it?’ or ‘I’ve never had to pay corporation tax and yet to make a profit’, but the answer is yes! This relief can be taken as a cash payment now whether you’re in profit or loss. It’s a win, win.
What type of activity/project is eligible for R&D Tax Relief?
R&D can be claimed for anything that improves or advances your business. These activities/projects can’t be routine, therefore should be challenging and not be an easily attainable solution.
Still a bit confused? Here are some examples of the types of things you could submit as R&D:
- Creating a new product – This would need to be an original design as opposed to buying something and just white-labelling it. It could be that you discovered a need for a new design or found a way to improve a product and spent time and money on prototypes.
- Developing a piece of software from the ground up to help streamline your processes or achieve a goal that other competitor software could not.
- Creating automation between systems – this could be an innovative way to challenge the way your business operates, improving efficiency and productivity. However, keep in mind that this cannot be something that’s readily available on the market.
These are just a few examples of R&D projects, whilst the list for what qualifies for R&D can be extensive. Not all accountants are familiar with the details of the R&D Scheme and even if they are, it’s difficult to identify an innovative project simply by reviewing a business’s accounts.
Therefore, it’s worthwhile arranging a chat with one of Sapphire’s R&D Tax experts who can identify what activities qualify for your particular industry and assist with presenting this to HMRC.