The Research & Development tax credits are quite enthusiastic toward businesses. It provides tax credits reliefs up to 33 % to those companies that are qualified for R&D tax credits.
The UK invests £6 billion annually in research bodies and universities. Our network of centers of excellence supports the commercial exploitation of new technologies.
We also have several specialized business clusters across the country. This includes Modern technology and medical technology in the Northern Powerhouse the British “Silicon Valley” in the Cambridge, Milton Keynes, and Oxford region a thriving research landscape in life sciences and renewable energy in Edinburgh.
According to the World Bank, the UK has very uncomplicated and transparent rules and laws that help make it the number 9 easiest country to start up your business in.
What are R&D tax credits?
The Research & Development tax credits generally help small-scale businesses to save a large amount when paying the taxes. There are still many businesses and companies that do not know of R&D tax credits and haven’t applied.
Companies can apply for the R&D claim annually for the eligible activities that are carried out by the company to develop new or existing products or processes.
It is also said that the amount is completely dependent on the qualifying expenditure that is the total amount the company has spent on activities that are considered under R&D tax credits.
If your company is making profits, then your tax bill can be reduced to a large extent, and if it is making a loss then you can get cash credits immediately by surrendering your losses.
Eligibility to Claim R&D Tax Credits?
The very basic rule for your company to claim R&D is that it should be registered under UK Corporation Tax. If any international company is having any kind of franchise in the UK and is also registered under UK Corporation tax. However, all the qualifying activities of R&D is not necessary to be conducted in the UK.
The company working in any kind of sector can qualify for R&D tax credits and are ways to do so
The eligibility of companies depends on the following factor if:
- A Business has developed a new product or software
- A Business has improved an existing product or software
- A business has executed a project with no definite outcome due to technical limitations.
- A project is executed in a harsh condition or environment
- Your company employs architects, engineers, or software developers.
- Your company is a small scale that has employed a third party for any of the above points
Costs included/excluded in R&D Tax Credits claims:
There are many kinds of cost that R&D tax credits covers and many costs that they don’t. The kinds of activities that are considered under R&D are giving salaries to all kinds of full-time employees and part-time employees of the company and charges for software licenses.
And the added cost that is to be given to the third party if hired is also included. Other than that, the costs of all amenities or resources that are needed such as gas. Electricity, water, etc are also covered under R&D tax credits claims.
Any other cost not mentioned above is excluded from the R&D tax credits claim. These costs are generally the operational cost such as office rents and food etc, items used in the production of software or any other products, and so on.
The process to apply for R&D Tax Credit:
Many companies often send their application to claim R&D tax credits at the end of their accounting period, when they are paying their corporate tax.
Companies can give in their claims for any project that is been executed in the past two years from the time of claiming R&D. You can lose your R&D benefits permanently if R&D activities is been carried out before that period.
- If a company is interested in claiming their R&D tax credits, then they must decide to whom they are delegating the process, such as their financial team, External accountants, or a specialist of R&D tax credits, each of the above-mentioned approaches has its advantages and disadvantages.
- If your company claims for the R&D Tax credits then it has to undergo several processes. It generally consists of:
- Evaluation and verification of the eligibility criteria if the company.
- Collecting of information related to the technical or financial department.
- Separating the time invested in the project and the expenditure of all the qualified and non-qualified activities that are being carried out by the company to develop a product or process.
- If the company has hired any third party to carry out any kind of R&D activities, then the contract will be reviewed to make sure that all the work is being done for the same project.
- Then the claim documentation being prepared and the claimed narrative Is being written.
- At last, the claim is reviewed and submitted.
- If your R&D claim is successful that you can get that within 28 days from the date of submission.
R&D tax credits are an excellent scheme for companies to offset the expenditure of many activities that brings innovation into the generation.
However, many companies are still not aware of The Research & Development tax credits and many of them are having misconceptions about the same. Therefore, they miss out on the opportunity to receive their annual claims. According to some facts, UK companies have claimed around £3.5 billion through this R&D Tax credit scheme in the year 2016-2017.
There are many tax benefits if your company is claiming for R&D. Majorly there are 3 great benefits.
First is that you will get the cash credits if your company had faced a loss. The second is that the company can get a partial refund on the Corporate Tax they have paid for the past two years.
If they had an R&D claim, then they wouldn’t have to pay taxes. The third is that the taxes can get reduced to a larger amount.
If you are interested to apply for R&D Tax Credit, contact us at Grantly (https://grantly.co.uk/). We can find the Honest, Legit and Top R&D advisors for you.
Our services are 100% Free for businesses seeking R&D tax credits!
We simply charge our partner R&D advisors a percentage of the fee that they charge you after a successful claim.