Research and Development tax credits remain an area of uncertainty for large and small businesses alike.
In our experience , only around 50% of those companies eligible have investigated the opportunity and of those, around 10-20% have made a claim. This is often because they have taken an ‘accountancy approach’ when looking at pulling claims together.
The amount of tax relief for R&D activities was increased to a maximum of 225% against Corporation Tax in the last Budget. However, claiming R&D tax credit is often seen (by accountancy providers and businesses managers) as too complex, meaning businesses don’t always realise that they are eligible, or are deterred by the application process.
HM Revenue and government guidelines show how many companies, in all types of industry, can qualify for this financial incentive but claims are still proportionately low.
R&D is not just about people in white coats, could any one of the following apply to your business?
(a) Some work, a project or new idea has been investigated which seeks to achieve an advance in the field of technology or science.
(b) A project required your business to extend its overall knowledge or capability in a field of science or technology.
(c) A process, material, device, product or service has been created that incorporates or represents an increase in a field of science or technology.
(d) An appreciable improvement has been made to an existing process, material, device, product or service through scientific or technological changes.
(e) Science or technology has been used to duplicate the effect of an existing process, material, device, product or service in a new or appreciably improved way.
It is important to understand what is eligible and how that information can be extracted from management information. For example, if engineering team leaders in a manufacturing business are asked how much time has been spent on R&D; the likely answer is very little as technical managers often interpret their activity as part of the process. However, if those same people are asked where their teams are involved in solving technical uncertainties, adapting process and products, trial testing variables on production and adapting technologies to improve efficiencies etc., the answer is very different.
Claims can be made two years back from the next financial year end. Is your business missing out?