R&D rebate benefits & are you up to date with the new rules?

Many companies have heard of R&D Tax Credits or ‘rebates’, or have a vague idea of what the scheme is. But the well-known complexity of claiming, even though the rewards can be massive, is often rather off-putting. This means that companies just like yours lose out on cash year on year.

R&D tax credits are one of the ways you can reduce your Corporation Tax bill (legally, of course) or have cash sent back to your business to further invest. The scheme was unveiled by the government in the year 2000 and to date over half a million claims have been done with a staggering ￡47bn+ being paid out or used to offset corp tax!

However, despite these facts, too many businesses are still missing out. This is a massive shame to those not benefitting.

But the fact is, there are many misconceptions about R&D Tax Credits that stop companies from claiming. That’s why we want to point out the benefits

R&D TAX CREDITS BENEFIT #1: ANY SECTOR OR INDUSTRY CAN BE ELIGIBLE

A really common misconception is that only science or technical companies can apply. But this couldn’t be further from the truth.

Research and Development occurs across just about every company in any sector – and R&D Tax Credits is open to all of them. In fact, the construction and agriculture industries are particularly big claimers, along with the software and manufacturing businesses. As long as eligible activities and costs are included in your R&D Tax Credits application, then you’re likely to be entitled.

Additionally, you don’t have to be a huge company undertaking something totally disruptive and newsworthy. Even the smallest innovations to products, services and processes can still attract thousands of pounds.

R&D TAX CREDITS BENEFIT #2: A VAST RANGE OF COSTS ARE ELIGIBLE

The scope of projects and costs that can attract R&D Tax Credits is purposefully extremely broad. However, the most common costs (regardless of the branch of the scheme you’re using) include:

• Staffing costs (salaries, wages, NIC and pension fund contributions);
• Costs in relation to subcontractors, Externally Provided Workers and freelancers;
• Consumables that were used up in the R&D process (typically utilities and materials);
• Software;
• Payments made to volunteers for clinical trials

This is not an exhaustive list however, which is why it’s highly recommended you use the services of an expert to make sure you’ve included everything. You also need to be extremely careful about adding in costs which seem eligible but in fact aren’t. Otherwise you could end up with an HMRC audit - and nobody wants one of those!!

R&D TAX CREDITS BENEFIT #3: NO MINIMUM CLAIM AMOUNT

Back in the day, there used to be the rule that R&D tax relief claims had to total at least ￡10,000. However, in 2012, the rules changed and the ￡10k minimum floor was abolished – great news for small companies in particular.

However, even ten + years later, many companies still aren’t aware of the change. Nevertheless, no lower (or upper) claim amount currently applies.

R&D TAX CREDITS BENEFIT #4: CAN EVEN BE CLAIMED BY LOSS-MAKING COMPANIES

The economy is struggling and loss-making companies in particular need all the help they can get. However, the sad thing is that many will think they can’t claim R&D Tax Credits for the very reason that they haven’t turned a profit.

Good news again though: they can. Although the rate of relief is slightly different than if they were profitable, loss-making SMEs that meet the eligibility criteria can in fact receive between 14.5% and 33% in R&D tax relief. Larger companies claiming through RDEC (or small companies that have previously received state aid) can still attract relief of 9.7% of qualifying R&D expenditure.

For loss-making companies, the relief is typically administered as a cash credit. However, companies can – if they wish – choose not to surrender the loss. Instead, they can carry it backward or forward against profits.

The new guidelines...

Why did HMRC change the requirements for R&D claims? Quite simply to ensure those abusing it and doing it incorrectly disappear and it is already becoming clear that some of the ‘specialists’ out there don’t know their a** from their elbow!?

It's now more important than ever to do things right, claims are being flagged or bounced back for explanations and if you are unable to answer the questions of justify it straight off the bat, you run the risk of fines and having a black mark against you - that is not what anyone needs.

ALL businesses must now ensure they are dealing with a specialist who know about all of the changes and are able to ensure that anything going in is now water tight.

We can help you, we have experts at hand and work with the biggest claims provider outside of the big 4, they take time and have serious dedication in understanding our clients and their projects as?well as writing incredibly detailed technical reports to supplement their R&D activities.

If you aren't sure which way to turn now, especially if you have been doing your claims in house, talk to us, its time to start using a specialist.

Thanks all.

Graeme

Money Sphere - [email protected] / 07948 560 642 / 0800 689 5312