Talk of tax can often bring about a sense of dread, not least in small business leaders that are already snowed under with things to manage. With the responsibility for generating business and managing personnel, working with clients and optimising processes, you’d be forgiven for letting knowledge of certain tax niches slip through the net.
If so, worry not. Research has shown that you’re in the majority, with only 10% of qualifying UK businesses currently taking advantage of one such niche: research and development tax credits offered by HMRC. This means that the remaining 90% of applicable companies are ‘leaving money on the table’ and not benefiting from the rewards their work deserves.
What are R&D tax credits?
Introduced in 2000 by the UK government in order to maintain a position at the head of cutting-edge industry, R&D tax credits provide those businesses engaged in innovative R&D work with a valuable financial injection at the end of the tax year.
For SMEs and start-up companies, this reward can prove invaluable to the continued operation of work. What’s more, even businesses that are loss-making have the opportunity to benefit from the work conducted, regardless of whether or not the research was completed successfully or not.
What costs can be claimed?
It’s important to note that only specific expenditure that has gone towards research and development activity can make up your claim for R&D tax credits. For example, costs associated with staff salaries and even outsourcing costs can be reclaimed, as too can software licences and selected material costs.
If successful, any claim for such costs could be worth a substantial amount to your organisation, with the value of an R&D claim meaning that, for every £100 spent on R&D activity, the taxable profits are reduced by £130 in addition to the money spent.
Are we eligible to claim?
As already noted, very few eligible businesses have been – or are even aware that – reclaiming the costs on research and development activity can support their company. What’s particularly surprising about this is the fact that eligibility criteria is open to almost any business in any industry. As long as your company employs fewer than 500 employees, is registered as a limited company in the UK, and has an annual turnover not exceeding €100 million, you have a strong chance of being entitled to claim under the SME scheme.
Of course, it’s important to remember that you have to be able to demonstrate that your business has been engaged in working to resolve specific scientific or technological problems, the benefits of which could positively impact the industry as a whole.
Once you’re certain you meet these requirements, starting the process of making a claim can begin. With R&D tax specialists on hand to help, you can attain the support your business needs to be successful in recovering costs.