New R&D tax credits, New system for 2023?
Derek Granger
?? Helping Accountants, R&D Advisors & Startups Build Partnerships That Fuel Growth
New Year - New Focus on R&D
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Challenging economic conditions, post-pandemic fallout and shifting working models have all made life uncomfortable for businesses in recent years. As we enter 2023, the start of a brand new year means a new focus on the things that matter most. Innovation is something that enables growth in organisations and presents opportunities to expand - and to change the status quo. Investing in research and development to drive innovation this year makes a lot of sense when the focus is on achieving objectives and reaching goals. R&D tax credits are a simple way to fund a new focus on R&D in 2023.
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Fund R&D with tax credits
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R&D tax credits were initially established to help support innovative organisations in funding ongoing research and development. In the intervening years they have grown into an integral part of the government’s innovation strategy and become much easier to access as a result. Innovation is positive for the British economy and great for business, which is why R&D tax credits are so well supported by the government (which has committed to “raise investment on R&D to 2.4% of GDP by 2027”). Companies actively investing in R&D have three times higher average turnover than those that aren’t so the figures speak for themselves.
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How do R&D tax credits support you?
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A business that is innovating and carrying out qualifying activity can make a claim for R&D tax credits, resulting in either a cash payment back into the business or a reduction on corporation tax. Either way, R&D tax credits have a positive impact on cash flow and help to free up vital resources for generating growth for the business. Plus, the more you invest in innovation, the bigger the claim you can make and the more cash is likely to be returned to your business.
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New R&D tax credits, new system?
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While the system for claiming R&D tax credits remains similar to the early days, it has become a very popular way for businesses to better support internal innovation. As a result, the claims process has been tightened up with more HMRC compliance teams focused on ensuring that the right cash ends up with the right people. That’s why it’s now more important than ever before to be able to correctly identify the projects within your business that are likely to be eligible and to clearly set out why those projects meet the relief criteria. There is no guarantee of success when it comes to R&D tax credits but successful claims can be transformative so it makes sense to ensure you have the best possible chance of a claim being approved. That might mean working with advisers or implementing a reliable, annual process for R&D tax credit claims.
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From COVID-19 to Brexit, every business has been affected by different challenges in recent years and, for many, resources have dwindled. R&D tax credits provide a way for innovative enterprises to boost cash flow to help create a new focus on development and growth in 2023.
For more detailed information regarding your approach to innovation and R&D tax credits drop me a note and let's book a call.
Derek Granger Director at EY Breakthrough Incentives
The views expressed in this article are my own and do not necessarily reflect the views of the global EY organisation or its member firms