Research and development (R&D) tax relief has the power to transform your business. So it’s important you know the ins and outs.
Many business owners haven’t heard of R&D tax relief and don’t know it is available to them.
In simple terms, R&D tax relief is available to small and medium sized enterprises. The government hopes the scheme encourages innovation and increased spending on research and development activities for companies operating in the UK.
It’s one of the government’s top incentives for encouraging investment in research and development. A percentage of the company’s spending on R&D can be recovered either as a reduction in corporation tax or a cash repayment. It’s saving companies across the UK billions of pounds per year as they expand.
Two big bonuses of R&D tax relief are that it saves you cash – or takes a chunk off your tax bill. It also encourages you to invest more into your business and create room for further expansion. It’s can be a big win-win!
The R&D tax relief will allow your company to deduct an extra 130 per cent of your qualifying costs from your yearly profit, as well as the normal 100 per cent deduction, making a total 230 per cent deduction.
You can also claim a tax credit if the company is loss making, worth up to 14.5 per cent of a ‘surrender-able’ loss.
Do you qualify for R&D tax relief?
Only certain companies can make a R&D tax relief claim. You must have less than 500 staff and a turnover of less than €100m or a balance sheet total under €86m. There are lots of clauses and conditions on the government’s website, and of course a good accountant will explain all this to you.
You can claim certain costs on the project from the date you start working on it until you develop or discover the advance, or the project stops.
For staff working directly on the R&D project, you can claim a proportion of their salaries, wages, pension and NI contributions.
You can claim 65 per cent of any subcontractor costs as well as software license fees and a portion of materials and utilities.
You cannot claim for the production and distribution of goods and services, capital expenditure, the cost of land, patents and trademarks or rent and rates.
So what’s stopping you? Well, you need to work out the start date of your R&D activity, identify any technical issues that need to be resolved and then you can fill in a form up to two years after the end of the accounting period it relates to.
You can even calculate your R&D claim amount using the online facilities. If you want to make the most of R&D tax relief to help your business grow, contact us for information.