Could you be missing out on a tax saving opportunity?
R&D (Research & Development) Tax Credits can be a real benefit for qualifying companies. First introduced by the Government in 2000, they have provided over £6 billion to UK companies in the form of reductions to Corporation Tax payments. However, the take-up remains low as many companies do not know they are eligible for the scheme.
A common misconception is that R&D is only undertaken by individuals wearing white coats and working in laboratories. In reality, the majority of claims are made by those in technology fields including precision engineering, architecture, manufacturing, software development, construction, recycling, brewing, publishing, kitchen design and many more.
Any limited company can apply for R&D Tax Credits as long as they are undertaking research and development work to overcome a scientific or technological uncertainty. Understanding what this means can be a challenge but, in general terms, it applies to projects where the desired outcome may not be achievable. To assess this research, testing and trialling needs to be carried out. There must be a genuine possibility that the project may fail and that associated expenses may not be recoverable.
Even loss-making companies can benefit from R&D tax credits and in such circumstances there is the option to surrender R&D losses for a cash payment, injecting much-needed funding into companies which may otherwise struggle to move forward with their projects.
Eligible companies can make an R&D claim via their Corporation Tax return. Even if such a tax return has already been submitted, all may not be lost. The legislation allows a company two years from its financial year-end in which to make an R&D claim. Some companies are also eligible for the Advanced Assurance Scheme, as long as they have not made an R&D claim before.