UK today has a strong innovative strength and is commonly referred to as the most innovative country in the world. The UK owes this important position to both the large multinational companies as well as the numerous small and medium-sized enterprises that have a high level of innovation. Companies that spend money developing new products, processes or services; or enhancing existing ones, are eligible for R&D tax Credits
Lots of these companies are already doing more research today and development abroad, be it due to the proximity to the sales markets or production facilities, or be it due to better framework conditions.
To maintain the UK and its innovative strength or to expand and strengthen it, are framework conditions that promote innovation necessary. Input funding from R&D has proven itself here to be a suitable means
Research and development (R&D) activities by companies are essential prerequisites for technological progress and sustained productivity growth. In many countries, companies are subsidized by the state in their investments in innovation.
This is always particularly useful if the companies not only increase their productivity through their research activities but also have positive effects on many different companies and society.
Firms gain a competitive advantage in some way unable to replicate their competition. When research and development efforts lead to an improved business process – lower marginal costs or increase marginal productivity – it is easier to realize a competitive advantage.
R&D could also lead to a new type of product or service. According to the Small Business Administration, this is most common in industries such as industrial machinery, trucks and tractors, computer technology, and manufacturing.
Many entrepreneurs and small businesses have earned a quite good amount of money in a short time by selling innovative ideas to well-established companies with many resources.
In this fast pace generation, where money holds an important value, The Research and Development Tax Credits system proves to be the worthies credit support given by different innovators and entrepreneurs.
The R&D system which was launched by the UK government in the year 2000 has grown its popularity and is considered the most beneficial system.
There are so many businesses or companies that are striving hard and are eligible to get their R&D tax credits but unfortunately, they are not at all aware of the system. Therefore, losing amazing opportunities to save many pounds even if the business is not giving them profits. If we talk about benefits, then there will be a long list for it to describe.
The input-oriented tax promotion of research expenditures also makes more economic sense. A company’s R&D expenses are either taken into account when calculating the taxable profit above the amount due, or the tax payment due is reduced directly by a certain proportion of the R&D expenses through a tax credit.
This reduces R&D costs, which creates incentives for additional research investments. Numerous studies have shown that these R&D discounts have a positive effect. As a tax policy instrument, this R&D subsidy is not only sensible but also very effective.
Sector or industry doesn’t matter:
The first benefit you get is that no matter what sector you are in, you are still eligible for the R&D tax credits. All kind of businesses is welcome to apply for R&D credits.
There is a myth that many people believe in and that is that the R&D system is only for the companies who are in the technological or scientific field. However, that’s not the case, if a company is UK based and pays the Corporation tax then it is most likely eligible to apply.
The size of the company doesn’t matter:
No matter what sized company you are having, you are still eligible to apply for R&D credits. It is normally categorized by the term SME and RDEC.
The SMEs consist of a company which is having a staff of fewer than 500 people and their turnover is not more than €100 million annually or having a balance sheet of less than €86 million.
On the other hand, large companies can apply their R&D through Research and Development Expenditure Credit (RDEC) scheme. All the large companies who are eligible can get their R&D relief up to 230% of their total expenditure on R&D activities which included the salaries of all the staff, costing of the third party if hired, or the cost of material needed
Cost eligibility For R&D Tax Credits:
If a company is launching a business, there are many costs hidden behind that. If you are eligible for R&D tax credits, you can enjoy the benefits as most of the costs are being covered. Whenever you apply for R&D tax credits, the most crucial part is to mention the costs for which you are claiming. When it comes to claiming your R&D tax credits, a few types of costs are covered.
- Wages of all the staffs and employees
- Materials and resources used for the Business
- Cost of software that is used
- Cost of the third party, if hired
- Clinical trial volunteers and many more such costs, for which you can claim your R&D relief.
- No minimum claim required.
No fixed amount is mandatory for you to claim R&D tax credits. However, this was not the case before April 2012, where it was required to pay a minimum of £10,000 on R&D activities to claim your R&D tax credits. But since the rules are changed it does not apply anymore and many are not aware of this change of rule.
You can confidently apply for R&D tax credits even if you spend the smallest amount you can on R&D activities which are quite beneficial for companies that are having a small budget.
The benefits of the tax credit are easy to see. Research firms benefit directly from the immediate liquidity effect and would particularly help companies with limited financial resources.
Because the reform would start with the wage tax, it would also be administratively easier to implement than other options for tax incentives. The necessary information is usually already available from the tax offices and can be easily checked.
Few of the benefits of research and development are obvious, such as the possibility of increasing productivity or new product lines. Some types of investors are looking for companies with aggressive R&D efforts. It’s also not uncommon for small business owners to make a ton of money on R&D by being bought out by a larger company in the industry. Get Started Now!