Business owners across the UK are eager to stabilise and recover from the impacts of the Covid-19 pandemic. While the UK Government has offered support in the way of grants, loans and extensions to tax filing deadlines, businesses are still exploring ways to enhance their bottom line in a tax efficient way.
Here at Lime Advisory, we are ensuring all businesses are aware of R&D Tax Credits; a tax incentive designed to drive competitiveness and encourage companies to invest in innovation.
First introduced in 2000 by the UK Government, R&D tax breaks can play a key role during these challenging times, helping businesses not only stabilise, but grow and innovative in a post-covid world.
What are R&D Tax Credits?
R&D Tax Credits are a Government tax break provided to businesses that invest in research and development (R&D).
With fully researched and developed companies benefiting the economy, the UK Government is encouraging startups and established companies to take a leap of faith and attempt projects that are technically challenging. With each business having different goals and purposes, research and development needs will differ from company to company. However, R&D Tax Credits provide businesses with a financial kickback for taking a risk, facing challenges that require additional efforts, time and money. These include:
- Expenditure on subcontracted R&D tasks.
- Money dedicated to consumables and materials. These include heat, light, power and water etc.
- Funds spent on software design and development
- Expenditure on staff including gross salaries, employers NIC and employers pension contributions.
- Expenditure on agency workers that contributed to the research conducted.
Who Qualifies for R&D Credits?
As R&D tax relief is a form of Corporation Tax Relief, they’re available to all limited companies, irrespective of industry. The SME scheme which most companies fall into has thresholds of Turnover less that £100M, less than 200 staff and gross assets of less than 86M euros. While Government documents state that R&D activities need to have a ‘technical’ or ‘scientific’ element, this a lot broader than you may think.
You do not need employees with PHDs and white lab coats to qualify. This is the biggest misconception surrounding R&D Tax Credits. If you have invested time or money to enhance a process, product, or service, you are likely to qualify for R&D Tax Credits. Here at Lime Advisory, we have processed successful R&D tax claims for a whole myriad of companies. From technology startups and manufacturing companies to accountancy firms and restaurants, you will be surprised by the criteria.
Please note that companies do not need to be in profit in order to claim. The project doesn’t need to be successful either. If the project failed, you can still make a claim.
What are the key benefits of R&D Tax Credits?
While there are many obvious benefits to claiming R&D Tax Credits, there are also some advantages that you may not be aware of.
- Additional cash – R&D credits can create an additional cash injection to businesses.
- Boost innovation – Businesses that are aware of R&D tax benefits will naturally invest in R&D and innovation, knowing that they have the comfort blanket of R&D Tax Credits to rely on.
- The economic benefit – On average, every £1 spent on public R&D delivers approximately £7 of net economic benefit to the UK.
- The global benefit - R&D Tax Credits help put the UK at the forefront of R&D and innovation across the globe.
Don’t have the time to claim?
Lime Advisory is made up of a team of tax specialists with a sound knowledge of R&D Tax Credits; all of which boast a thorough understanding of tax legislation and HMRC practice. As a result, Lime Advisory has built a reputation for minimising HMRC risk, maximising claim acceptance rates and making the process of claiming R&D Tax Credits seamless. Requiring little effort from the client, we ensure businesses retain their precious time.
If you are looking to gauge whether you qualify, we will book in an initial call to discuss the work the business has conducted, identifying any eligible projects when doing so.
When we have identified the correct areas that you can claim a relief on, we will work with you on the narrative, using cloud software to collaborate on the document. We will work through your expenditure to identify the eligible costs before putting together the final report.
The claim is made as part of your corporation tax return, with a narrative and calculation of R&D activities included in a report. This can all be handled by the Lime Advisory team.
All R&D Tax Credit claims are monitored and processed by HMRC. But it is also worth noting that you can make a claim going back 2 accounting periods.
If you are looking to explore the subject of R&D Tax Credits and find out whether your business is eligible for a rebate, be sure to contact Lime Advisory today.