ARE you potentially missing out on thousands of pounds worth of tax savings by not claiming research and development (R&D) tax relief? The Government think so and so do we.
Latest statistics show that more and more SMEs are making claims, but there are lots of businesses out there who are not. Many companies are not taking advantage of this extremely generous tax relief – if you are entitled to claim R&D tax relief, let’s make sure you are not one of those businesses who miss out.
It’s easy to think that R&D can only be claimed by companies involved in the scientific and technological industries. This is far from the truth; any company can potentially claim R&D tax relief so long as they are using or developing new technology to improve a product or a process.
We have made claims for clients in various industries including manufacturing, retail, wholesalers, rural, etc. Not just the white lab coats curing cancer. Indeed, most manufacturing and IT based companies are more than likely undertaking some form of R&D, whether they realise it or not.
Here are some key questions for you to consider:
* Have you produced something that you haven’t done before?
* Do you have a technical director?
* Have you recently automated a process that was previously a manual operation?
* Do you have any patents?
* Have you developed a new IT platform or operating systems?
* Do your accounts have an R&D accounting policy?
* Have you developed new tools, products or services using technology or tried to improve efficiencies?
If the answer is yes to any of the above; then R&D needs to be explored further.
The tax rules around R&D can be complex, but at its core a company incurring qualifying (revenue) expenditure on eligible R&D projects can receive an additional 130 per cent tax deduction under the SME scheme.
If you incur losses, these can be surrendered or given up for R&D tax credits which is equivalent to £33.35 cash back for every £100 eligible R&D spend.
One key point is that you must make the R&D claim within two years from the end of the accounting period in which the company incurred the R&D costs.
The following costs are examples of what can form part of the R&D claim:
* A percentage of salary costs including employers’ NIC and employers’ pension contribution where staff are involved in R&D projects
* Raw materials consumed within the R&D project
* Sub-contractors involved in the R&D project
* A percentage of light and heat costs
Also, as a side note, capital expenditure on equipment used in R&D projects (whether those projects qualify for R&D tax relief or not) can receive a special 100 per cent R&D Allowance under the capital allowance rules.
Baldwins have a wealth of experience in submitting successful R&D claims for its clients. If you would like to discuss a potential R&D claim, contact Baldwins on 01536 514871 and ask to speak to one of our tax experts, who would be happy to assist.