Here Are 5 Tips To Claim Your R&D Relief Faster And Easier
R & D Tax Relief Advice
The Research and Development (R&D) tax relief in the United Kingdom is one of the most effective and generous in the world. A company’s tax bill can be significantly reduced or even refunded by claiming government-backed relief.
However, many companies that are eligible for the relief do not file a claim, either because they are unaware of the relief or because it appears to be too complicated or inappropriate for their business. R&D tax credits are available not only for traditional scientific research, but also for design and engineering development.
What is UK R&D Tax Relief?
Companies that invest in innovation and develop new technologies to significantly improve products, processes, devices, materials, and/or services are eligible for R&D tax relief.
The requirements are designed to be as broad as possible. If your company, regardless of size or industry, is taking a risk by attempting to “resolve scientific or technological uncertainties,” you may be engaging in qualifying activity.
To qualify, R&D does not have to be successful. You can include both client work and personal projects in your portfolio.
If they do qualifying work, any company, large or small, can claim – even if they do not pay Corporation Tax because they are unprofitable.
What is R&D Tax Relief Worth?
Some businesses will be eligible for a tax credit of up to 230 percent on qualifying R&D expenses. So, if your company pays Corporation Tax at the rate of 19% and spends £100,000 on qualifying research and development, you could save £43,700 in tax. In certain circumstances, loss-making businesses can surrender their losses in exchange for a refundable tax credit.
In addition, a taxable credit of 13% of qualifying R&D expenditure is now available beginning April 1, 2020. The tax credit is fully refundable for businesses that are losing money (subject to certain restrictions). Companies that do not owe Corporation Tax will benefit from RDEC in the form of a cash payment or a reduction in the amount of tax or other duties owed. The payable credit is limited to the company’s PAYE/NI contributions liabilities for employees who participated in qualifying activities during the accounting period.
What Costs Might Qualify as R&D?
The costs that may be eligible for R&D tax relief are numerous and include:
- Subcontracted R&D
- Software trials and prototyping
- Independent research costs
- Direct and externally provided staff
Capital expenditure, as well as expenditure on the production and distribution of goods and services, are not eligible under this scheme.
How Do I File a Claim for R&D?
Small and medium-sized businesses are unaware that they are eligible for the R&D tax credit, which is one of the main reasons why so much money goes unclaimed. Alternatively, even if they do know about the scheme, they have no idea how to do it properly. That’s a massive mistake.
Pearl Lemon Invest’s R&D tax credit experts can help you determine if you have a valid R&D tax credit claim and, if so, guide you through the process of claiming it, ensuring that you avoid the pitfalls that lead to such claims being denied and that you receive every penny you are entitled to. We handle all of the legal legwork and paperwork, freeing you up to focus on what got you that credit in the first place: innovating for Britain.
What costs can be claimed for R&D?
Some of the costs claimed for R&D include any power, fuel, water, and/or materials consumed during the R&D procedures.
How far back can you claim R&D tax credits?
You can claim R&D tax credits as far back as two years.
What activities qualify for R&D credit?
Many activities can qualify for R&D credit. A few of them are beta testing, compiling research data, 3D modeling or CAD, the fabrication of experimental models, developing engineering architecture and technical design reviews, and many more.
If you want more detailed information, feel free to book a call with our experts.
Is an R&D tax credit taxable income?
No, it is not. The overall R&D tax credit claim is not considered taxable income.
For more information, book a call with our experts today!