Research and Development Tax Credits
Whilst all business owners set goals and take risks, there are some who take it to a whole new level. If your company carries out research and development as a means of improving existing products and developing new ones, you should be eligible to apply for R&D Tax Credits.
The importance of R&D
There are multiple advantages made possible by research and development. The most obvious is that you’re enhancing product lines, but that’s not where the benefits end. When done well, R&D can achieve so much more:
Solve problems faced by your target audience and customer base
Optimise specific areas of operations, which can result in lower costs, streamlined production and logistics, and a reduced carbon footprint
Establish a competitive edge by offering the very best version of a particular product
Improve your company’s reputation and attract top talent
Increase sales thanks to a superior offering
Showcase your company’s dedication and focus when applying for finance and taking on investors
Acquire patents for new products, ensuring sustainability within your marketplace
Does it just apply to physical products?
Nope. You’ll be pleased to hear that businesses conducting research and development for processes, services and software are also eligible to apply for R&D Tax Credits.
How do I qualify?
As long as you can prove that you carry out legitimate R&D, you should be fine. For instance, if you or your team started a project not knowing what the result would be or if the goal was even achievable, and the process led to a clearly defined outcome, you’re good to go. Even if the result wasn’t what you had hoped for, the point is that you carried out R&D to establish a clear picture.
Why do R&D Tax Credits exist?
The UK is a nation that thrives on creativity and clever thinking. R&D Tax Credits are designed by the government to incentivise this mindset, encouraging businesses to experiment as a means of making the world a better place. When a company invests time, money and effort into exploring the possibility of better solutions, it’s only fair that it’s rewarded for its hard work and dedication.
How much can I claim?
If you’re eligible, you can claim up to 33% of your research and development expenditure. Whether your project is relatively small or you spend huge amounts on R&D each year, claiming this tax relief is a very wise decision. The amount that HMRC decides you can claim will then be recovered by your business either as a cash payment or a reduction in Corporation Tax.
Benefits of R&D Tax Credits
Open to all sectors and industries
A wide range of costs are eligible
Achieve more with a smaller annual budget
Frees up more cashflow, which can be invested into additional R&D or other areas of your business
There’s no minimum claim requirement
You don’t even have to be turning a profit, you can still claim if your company is making a loss
Here to help
Tagged as: Tax & Expenses
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