R&D tax reliefs are among the most under claimed HMRC approved 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.
Having considered that qualifying R&D activities may have been undertaken – what is this great incentive?
HMRC will allow up to an extra 130% (30% for large companies) of qualifying costs to be deductible against taxable profits. In cash terms this means an additional 26p in your pocket for every £1 of qualifying R&D spend.
Also, loss making companies are not excluded, as losses can be surrendered to HMRC for a cash payment and retrospective claims can also be made for the past 2 accounting periods.
What costs can I include?
There are 4 key categories (although these are not extensive): Staff costs, Consumables (any materials used in the process of R&D), subcontract labour (e.g. quality inspectors, industry experts) and utility costs.
What is more, as of later this year, HMRC are to offer small companies a 3 year advance assurance making this relief even more accessible.
Here is a recent example…“Everything we do is bespoke, so can this be R&D?”
A local engineering company undertaking bespoke to order projects asked how does R&D work when everything we do is unique? The work carried out was in some cases innovative but did not contain any uncertainty, existing processes were simply applied to a new scenario.
However, by looking more closely at some of the individual processes involved in completing the entire project, we were able to identify elements of qualifying R&D was present and a repayment of £24,500 was received from HMRC.
The fact is if you don’t fully consider R&D tax relief then you may be missing out. Contact Lesley Sutton on 01484 550 037 or email email@example.com if you would like to discuss making a claim.