So many businesses are overlooking Research and Development (R&D) tax relief, not realising that they could be eligible for the Government incentive, which can significantly reduce your Corporation Tax bill or provide a cash repayment on the expenditure incurred.
In fact, according to HMRC’s latest figures, only 26,255 (0.3 per cent) of SMEs are making claims for R&D relief – a tiny number when considering the UK is home to more than five million small and medium businesses. However, awareness is rising, with the total number of claims and amount of relief claimed rising by 20 per cent last year. The average claim value for an SME now stands at approximately £57,000.
What is R&D tax relief?
R&D is a Government tax relief that rewards innovation, defined as “a project which seeks to achieve an advance in science or technology through the resolution of scientific or technological uncertainty.” R&D isn’t restricted to people in lab coats and software developers – the opportunity is there for all companies resolving technical challenges and extending knowledge or capability in their industry, regardless of the sector or industry they operate in. Basic examples include the development of systems and processes, adaptation of existing processes to improve efficiency, capacity or performance, design of a brand new product or technical improvement to an existing product.
The tax incentive enables your organisation to claim up to £43.70 for every £100 spent on qualifying costs, including wages, materials, overheads and software.
What qualifies for R&D relief?
R&D claims have been successfully carried out for companies in a wide variety of sectors, including packaging manufacturers, breweries, clothing manufacturers, engineering companies and software developers.
Businesses that spend money on analysing, designing and developing new products, processes or services or enhancing existing ones can claim for R&D relief. The relief allows an SME incurring £100,000 in costs on qualifying R&D activities to save around £25,000 in Corporation Tax.
Projects don’t even have to be successful in order to make a claim. If a company has encountered technical challenges and an answer is not readily deducible to a professional in the field, and the project fails, it still satisfies the criteria for R&D relief.
Is claiming complicated?
It’s a common misconception that claiming R&D tax relief is complicated and requires a lot of resource and time. Qualified tax experts and R&D advisors take away the hassle and do all the legwork, analysing the information and preparing the claim on your behalf, ready for review and submission.
On average, clients spend just 2-3 hours of their own time on an R&D claim, which is usually during an initial meeting with the directors/technical teams and providing the essential
With the average R&D claim being worth £57,000, it is definitely worth the few hours of time needed.
Get in touch on firstname.lastname@example.org or 0800 993 0193 to find out if we can help you.