The UK is undoubtedly one of the most attractive countries in the world for entrepreneurs and investors looking to make their mark on history through innovation.
Being a country with a post-industrial economy, the UK occupies a key position in many global value chains: from semiconductors and processors to pharmaceuticals, from advanced developments in the space industry to the latest materials.
The UK is a world leader in education and Science, which opens up access to a highly skilled and talented workforce and great discoveries.
The UK, has access to the largest global markets, which reduces the costs associated with international trade, and simplifies bureaucracy. Stability and independent legal and political systems create a very favorable investment environment.
Government strategies to encourage innovation and research are being prepared as fertile ground for the creation and growth of startups. However, so far, sources of information on what to expect are investing in innovation in the UK as an entrepreneur or venture capitalist have been fragmented and disunited.
A tax incentive for the innovative activity of enterprises is an important area of application of efforts to build an innovative economy. By now, in the UK as a whole, a system of tax incentives for innovation has been formed. During the early years, dozens of benefits were enshrined at the legislative level.
Today, for example, there is no doubt that it is reasonable to include qualified R&D expenditures in expenditures.
Kinds of the project that are considered for R&D:
All kinds of activities that are eligible for R&D tax credits should be from certain kinds of projects that can make progress in the field of science and technology. Any progression made in the field of social sciences such as theoretical or economics cannot be considered for an R&D claim.
For claiming R&D for your project, it is necessary to explain the details as to how it can bring change in that field, and not just be limited to your business.
Kinds of R&D relief:
Research and Development (R&D) reliefs usually depend upon several employees working in your company and its turnover rate.
First are small and medium-sized enterprises (SME). If any company has less than 500 staff and a turnover of fewer than 100 million Pounds or a balance sheet of less than 86 million Pounds is considered as SME. If you fall under SME, it may become necessary for you to incorporate any linked companies or partnerships.small and medium-sized enterprises
The other one is Research and Development Expenditure Credit (RDEC). This category is basically for large companies having more than 500 staff members as their employees and a turnover rate of more than 100 million Pounds.Research and Development Expenditure Credit
If any large company is working on an R&D project, then it can easily claim Research and Development Expenditure Credit (RDEC). Sometimes SMEs cannot take their R&D reliefs from SMEs because of the factors such as subcontracting. In that case, they can get their claim from RDEC.
R&D reliefs are beneficial for every company that is eligible for the claims. They can receive millions of pounds and thus, they can re-invest that amount back into their business.
How much worth you can claim from R&D relief?
All the R&D credits will be calculated depending on the amount of expenditure in R&D activities. Therefore if you want to calculate your companies R&D claim, then you must prepare the documents showing the total money spent on qualifying activities and then increasing it by the applicable rate.
Can loss-making companies claim R&D Tax credits?
The most common myth that is quite popular is that only profit-making businesses can claim their R&D benefits. But that is a false statement. You can claim your R&D reliefs as long as your company is successful to demonstrate the efforts to make developments in the field of science and technology.
The most significant factor about R&D relief is that it does not depend on the profits your company is making. The company will get the R&D relief no matter whether it is making profits or loss.
The R&D relief is structured in such a way in which both the profit-making, as well as the loss-making company can gain benefits.
Often, many companies or businesses are not successful and can face severe losses. Many companies are still not aware of the R&D tax credits, and those who know about this scheme do not have enough knowledge and therefore miss the opportunity to cover their loss.
Every company that has experience loss and is qualified for R&D credit benefits can claim their R&D relief. The worth at which you can claim your R&D depends on whether your company falls under SME or RDEC.
If a company is categorized as SME, then they can get benefits to up to 14.5% to 33% of your total expenditure on R&D activities. And if your company is categorized as RDEC, then can get benefits of 9.7% of your total expenditure on R&D activities. They can have two options:
They can either choose to receive R&D Tax Credit in cash by surrendering their losses of R&D
Another option is that they can carry forward their losses to offset against the profits that will be made in the future
Benefits of claiming R&D Tax credits:
Claiming R&D reliefs for your company can prove to be very beneficial. The Research and Development (R&D) tax credits scheme is backed up by the UK government.
And the main purpose behind that is to develop the companies that are contributing to advance the field of technology and science. It not only helps in developing the business but also gives a company an edge by making you compete with many different companies of the same sector.
If your company has successfully made the R&D claim, then not only it will inspire your business, but all the companies all across the UK, which results in quick progress and thus results in economic growth, which in turn will increase the labor turnover rate by adding up more opportunities.
If you want to apply for R&D Tax Relief benefits, we must tell you that it is tough to find genuine and reliable advisors.
However, at Grantly, we connect businesses with 100% genuine and reliable advisors. Get in touch with us to know more about our services.