Is your firm eligible for R&D tax credits?

Myth 

1: Research and development (R&D) results in a completely new product or method at the conclusion of the project – WRONG

2) R&D tax breaks are only available for successful projects – FALSE.

The truth

R&D is being carried out by your firm if it has been involved in a project that aims to develop science or technology.

Most SMEs are benefiting from technological advancements. An enhancement to an existing product or method may be sufficient to support a claim.

Is it really worth it?

Yes, it’s free money! The assistance for SMEs is now 230 percent. That implies that for every £1 of eligible expenditure, your firm will earn an extra £1.30 in tax relief.

Every £1 spent results in a reduction of £2.30 from taxable earnings.

In addition, loss-making businesses may receive a 14.5 percent refundable tax credit.

For example, suppose a corporation has a trade loss of £100,000 and qualified R&D expenditure of £35,000. The surrenderable loss is the lesser of £100,000 and £35,000 x 230 percent = £80,500.

As a result, the tax credit will be 14.5 percent x £80,500, which is £11,672.

What is required for a claim to be successful?

• There must be a project devoted to resolving the problem.
• There must be a desire to progress in science or technology.
• The project must be related to the company’s trade – either a current one or one that it plans to launch based on the R&D findings.
• The firm must describe how its effort attempted to address the ambiguity around the advancement it seeks.
• The problem must be one that a specialist in that area cannot readily solve.
• If a technique, product, or service has been created by another firm but is not publicly recognized or accessible, it is still considered an advance. Many firms, for example, are now developing both electrified and autonomous vehicles. They will both be receiving R&D tax credits.
• The project may investigate or create a new method, product, or service, or it may enhance an existing one.

R&D Assistance for Small and Medium-Sized Enterprises

A corporation is classified as a small and medium-sized enterprise (SME) if and only if it meets the following criteria:

• It employs fewer than 500 people and has a turnover of less than €100 million or a balance sheet total of less than €86 million.

Expenses that qualify

• Personnel costs
• Items that are consumable or transformable in software
• R&D expenditures were contracted out (65 percent )
• Workers that are hired from outside sources (65 percent )
• There are other R&D allowances that provide complete tax exemption for eligible capital investment.

Time limit – Two years from the end of an accounting period, in accordance with the company tax return deadline.