Tax deductions for R&D (Research & Development) and/or Technological Innovation activities are one of the instruments used by the Administration to promote business, through tax reduction.
However, on a high percentage of occasions, companies do not make a profit, with which the vast majority tend to think that they cannot benefit from this instrument, even having carried out R&D activities. This is where the tax credit comes into play.
What is the tax credit?
The tax credit is a “virtual money bag” generated, for example, by tax deductions and not applied in the current year. You can accumulate this money and use it in future years where you have Corporation Tax.
In the field of deductions for R&D activities, that sum of money that the taxpayer could have been discounted if they had obtained benefits during the tax annuity is converted into a tax credit.
In this way, the deductions calculated are not lost but can be applied in the immediate and subsequent 18 years.
If you are interested to apply for an R&D Tax Claim, check out here a complete process:
1. Initial Qualification:
Make sure that you are qualified for the R&D Tax Claim process. Know about the cost and know which scheme to claim under? Also, know what are its deadlines? Such rough assessments of the benefits and outlines of the detailed process are as under.
2. Project Accounts:
Launch the baseline from where that advance in capability or knowledge in a field of technology or science is sought. Describe the technological and/or scientific uncertainties, and how they were surmounted, and how the resolutions were attempted.
3. Cost Collecting:
Eligible amounts are those which relate to the activity of resolving technological insecurity, both costs indirectly and directly, the cost types which can be claimed are defined by legislation.
4. Benefits claim and calculation filing:
Internal agreement checks and then the accountancy handling of the claims, including filing the claims appropriately with supporting information.
Depending on the types of the schemes, benefits, and HMRC workload, the process and pay the claims in 4 to 16 weeks. About 99% of the claims result in payment without any inquiry.
As part of the self-assessment, HMRC may ask questions about the claims before the payment and they work through these as part of their services.
What companies can benefit from the tax credit?
Any company that carries out R&D activities can apply the deductions and consequently benefit from this incentive. Below are the two cases in which the tax credit applies:
– In the first place, those companies that cannot apply the deductions calculated for presenting losses, keep the deduction amount in the form of a tax credit, until profits are presented (18 years).
– Second, those companies in which the deduction calculated exceeds 50% of the amount to be paid in corporation tax. The remaining part can be saved as a tax credit.
When must deductions be calculated to obtain the tax credit?
Even if the company does not present profits, the deductions for R&D activities must be calculated and presented in the corporation tax for the current year. Otherwise, they would be lost and the company could not benefit from the tax credit.
Then, any deduction that is not calculated in the corresponding exercise, can no longer be applied in future years. For this reason, it is very important to register the tax incentives each year, and thus be able to accumulate them as a tax credit.
Public financing is a direct boost for all types of companies that allows them to develop new areas and achieve strategic goals. Public aid and subsidies are a very good alternative for business financing and public bodies.
Counting on different forms of participation, bankable concepts, and sectors to which they are directed, this tool is positioned as a basis for business growth, increased competitiveness, and the creation of new R&D projects.
Additionally, grants can become one of the most effective financing tools for entrepreneurs and startups. There is a wide variety of subsidy programs dependent on public bodies.
Compatible with deductions in R&D:
Public aid is 100% compatible with tax deductions in R&D, which means that between the lost fund and the reduction in Corporation Tax we can have a return of 70% of the financed expenses.
Innovative SME Seal:
Obtaining public aid in R&D allows us to obtain the innovative SME seal, a quality seal that recognizes companies that make special efforts in activities considered as Research, Development, or Technological Innovation. This means great tax advantages.
Obtaining public aid in R&D allows us to process the innovative SME seal. Thanks to this seal, the company can deduct and discount the personnel expenses included in the project. This means financing up to 75% of the personnel expenses dedicated to R&D.
Also, there are other important public bodies, that offer loans and other important aid programs, with favorable conditions for different types of action both nationally and internationally.
The funds for many of these programs come from specific European funds for the development of innovative activities and/or investment in areas of special qualification in which it is sought to increase the industrial fabric or promote a specific activity.
At Granty, we have trustworthy R&D advisors focused on offering a comprehensive service that ranges from the identification of opportunities, through the preparation of technical files to their presentation and justification.
Our advisors’ work begins by carrying out a comprehensive analysis of the business and the reality of our clients, analyzing from the characteristics of the company to their financial needs. With this, our advisors seek to offer the most convenient and appropriate solution at all times.
You have any doubts or do you want to take benefits of the R&D Tax Claim? Do not hesitate to contact us at https://grantly.co.uk/. We will connect you with experienced and reliable R&D Tax advisors.
The process is 100% online and free. Simply register here and generate your tax deduction for R&D.