2ND APRIL, 2020

Imagine What £65,000 Could Do For Your Innovative Company - Think R&D Tax Credits

Times are tough for businesses at the moment, to say the very least. Even when the war against coronavirus has long been fought and won, businesses up and down the country will still be looking for ways of boosting vital cash reserves.

The government has taken unprecedented measures in pumping money into the economy to help mitigate the pandemic’s effects. This includes a pledge to increase spending to £22 billion by 2024-25 on tax relief per year for public research and development (R&D) projects. But why does innovation matter right now and what can the R&D Tax Credits scheme do to help your company? Here we take a look.

Why is innovation so important?

Innovation impacts every area of society. It’s about continuous improvement, and bringing about economic growth. This in turn increases society’s wellbeing, access to education, better job prospects and better environmental sustainability.

Innovation and economic growth

Economic growth itself takes into account the inflation-adjusted market value of a country’s goods and services across a period of time. Indeed, technological innovation is right at the heart of a healthy economy.

For businesses, innovation is the key to obtaining an all-important edge over your competition. It means developing new products that are unique to your business - or even to your field - and in updating/improving products that already exist. This of course in turn often means investing in new staff and creating new roles, bringing in more tax and further strengthening the economy.

Innovation and staff motivation

Having a group of committed, dynamic and motivated employees will make a massive difference to a company’s ability to successfully innovate. Highly engaged staff who take creativity and innovation seriously are also likely to make it part of company culture.

Innovative employees bring about a long term market advantage, increasing profit over time and therefore strongly contributing to the company’s survival. After all, happy employees tend to be productive employees.

So what are R&D Tax Credits and how can they help?

R&D Tax Credits are a UK tax incentive brought in eighteen years ago to encourage company investment into research and development. Organisations that are successful will benefit via a reduction in their Corporation Tax bill, to reflect a portion of their R&D expenditure. Loss-making companies can also benefit, via a lump sum payment instead.

What are the criteria that mean an R&D project will qualify?

For tax relief purposes, R&D is considered to have taken place when a project aims to make an advancement in technology or science. The work should also directly help in achieving this advancement, either through the development of a new product, process or service, or by significantly improving an existing one. Certain eligible work carried out in relation to the project is also counted as R&D - the key point is that they have to be directly linked to overcoming the scientific or technological uncertainty in question. The answer to the problem must also not be easily deducible by a competent professional who works in the field.

How much can be claimed?

R&D Tax Credits work by reducing a company’s taxable profit, which in turn lowers its Corporation Tax bill. However, as mentioned even companies that haven’t turned a profit can benefit, so regardless of whether you owe a large amount of Corporation Tax, very little or even none at all, you can still benefit.

SMEs (which most firms claim under) can receive up to 33 pence in every £1 spent on R&D costs. This also covers R&D expenditure over the last two completed financial years.

How much a company can claim depends on the branch of the scheme it uses. By enlarge, SMEs that have received no previous state funding should use the SME R&D Tax Credits scheme, whereas larger organisations should use Research and Development Expenditure Credit (RDEC). You can find out more on our previous blog post: R&D Tax Credits: What's The Difference Between The SME Scheme And RDEC?

Average UK R&D claims are currently worth around £65K

Over the years, we’ve come across many reasons why companies don’t claim their rightful R&D tax relief entitlement. Many have told us they though they’d just get a few pounds - and had no idea that actually their claim would be worth much, much more!

We really hate to see companies missing out here at Myriad Associates (owners of Tax Cloud UK). With average claims at £65k, it’s so important that your organisation doesn’t miss out.

Money gained by businesses can also be used for anything they wish, from employing more staff to paying off debts to reinvestment back into the company. Many also choose to spend it on R&D project plans that are yet to take place.

How to claim for R&D Tax Credits

The claims process for this type of relief is complex. Eligible costs and projects are unique to each company and there are many grey areas. Not only do figures and calculations need to be submitted, a separate narrative that not only accurately explains the work but also why the company believes it is eligible needs to be written too.

Making a claim which is incorrect or incomplete is all too easy - which is why it’s highly recommended you use the services of R&D tax relief professionals such as ourselves at Myriad Associates.

Our highly experienced team specialises only in R&D tax relief and will work with you to put together an accurate, optimised and successful claim. We’re proud of our proven success rate, so you can rest assured that HMRC won’t come knocking.

Additionally, we developed our very popular, excellent value Tax Cloud portal. With specific areas for businesses as well as accountants, it’s a quick and simple way to calculate what you could claim and make your application.

Why not try the Tax Cloud portal today or call our friendly team for advice on 0207 118 6045. There’s also loads of information on our R&D Tax Credits page. Alternatively, please do drop us a message using our contact form so we can get back to you.

Barrie Dowsett, ACMA, GCMA
Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud
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Myriad are the creators of Tax Cloud, we help enterprises navigate, apply and secure tax incentives and grants. We specialise in R&D Tax Credits, Creative Tax Reliefs, Innovate UK grants, Horizon Europe grants, and R&D Capital Allowance Claims.

  • Submitting R&D tax claims since 2001
  • Strong track record spanning 20+ years delivering R&D tax credit claims
  • Over £70m claimed and counting
  • Industry leading specialists
  • We employ technical, costing and tax experts and tax experts
  • Confident of delivering value to our clients, we offer our R&D tax services on a success fee-only basis.

Meet some of the team behind Tax Cloud

Barrie Dowsett Barrie Dowsett ACMA CGMA Chief Executive Officer
Jillian Chambers Jillian Chambers Technical Analyst/Writer
Lauren Olson Lauren Olson Technical Analyst Manager
Rabia Mohammad Rabia Mohammad Corporate Tax Associate