R&D tax reliefs are among the most under claimed tax incentives currently available. Many mistakenly, and understandably, believe that if there is not someone working in a lab then R&D is not taking place.
However, the definition is much broader than this R&D does not require ‘blue sky’ innovation, nor does it have to consist of creating new technologies. Instead, appreciable improvements to existing technologies can qualify.
So ask yourself: Has my company spent time overcoming a difficult problem where it was initially uncertain as to what the solution was? If the answer is yes, then chances are R&D is involved.
HMRC will allow an extra 130% (30% for large companies) of qualifying costs to be deductible against taxable profits. So for every £1 of qualifying expenditure you get a deduction of £2.30 in your tax computation which translates as an extra £1.30 of tax relief you would not have without the claim. Also, loss making companies are not excluded, as losses can be surrendered to HMRC in return for a cash payment.
To make it even better, the Government is introducing a new scheme to make things easier for first time claims. Small businesses will be able to receive advanced assurances that they qualify for relief which will last for three years’ worth of claims. Also reduced processing times and clearer guidance has been promised.