20TH JUNE, 2022

R&D Tax Credits made simple for small businesses

R&D Tax Credits. Maybe you’ve heard of the scheme, maybe you haven’t. But if your business has recently undertaken any innovative work that involved some advancement in science or technology then R&D Tax Credits are for you. Especially if you’re an SME.

Latest government statistics show the estimated total number of R&D Tax Credit claims for the year ending March 2020 is 85,900, up by 16% from the previous year. The increase is primarily driven by a 16% rise in the number of SME R&D claims to 76,225. Should your company be in that figure?

What are R&D Tax Credits?

In a nutshell, R&D Tax Credits are a way for businesses to be reimbursed for innovative R&D projects that increase knowledge across the field. Any UK company that spends money developing new products, processes or services (or enhancing existing ones) can be eligible for either a cash payment or Corporation Tax reduction.

If your company is currently making a loss on research and development, you can choose to cash-in on said losses that come as a result of a HMRC claim. You will then be issued with a repayment from HMRC instead of your company having to carry forward this loss. So it doesn’t even matter whether your company is profit or loss-making, it can still make a claim for R&D Tax Credits.

What is an SME for R&D tax relief purposes?

Generally speaking, if your business has under 500 employees, a turnover of less than €100 million, or a balance sheet total under €86 million then it will claim R&D Tax Credits using the more generous SME branch of the scheme.

While this looks pretty straightforward, the SME status can be more complex if your company has external investors, or if it has previously claimed state aid. Our team will be happy to talk you through this.

How much are R&D Tax Credits worth to SMEs?

SME R&D tax relief means that smaller companies can:

  • Deduct an extra 130% of their eligible costs from their annual profit, as well as the normal 100% deduction - so a 230% deduction in total, or,
  • Claim a tax credit if the company has made a loss, worth up to 14.5% of the surrenderable loss.

In terms of value, an SME claim will be worth between 25% and 33% of the eligible R&D spend. It’s certainly one of HMRC’s most generous tax reliefs around, with many SMEs ploughing the resultant cash into further R&D projects.

How do I know if my company is eligible for R&D Tax Credits?

Luckily, qualifying activity requirements are quite broad, which means that if your company is taking risks that involve developing new products or services or implementing modifications to existing ones, it’s likely that you are eligible.

Failed projects will also be eligible, as HMRC does not specify that the research and development that is carried out needs to be successful.

If you are still struggling to determine whether your company is eligible, our online service couldn’t be more straightforward and user-friendly. Simply input your company details online along with your R&D projects and costs, and our highly-trained consultants will be able to support your claim at different stages, offering feedback to ensure you keep moving in the right direction towards a claim.

What type of activities can I claim for?

During the process of research and development your company can rack up a lot of different types of costs, so it’s good to know that you will be able to claim back money spent on a number of things including:

  • Staff salaries, overtime and pension contributions
  • Software license costs
  • Materials and consumables including heat, light and power
  • Subcontractors and freelancers

Why do so many small businesses still miss out on R&D tax relief?

Despite the fact that R&D Tax Credits have been around for the last twenty years and more, so many small companies especially are missing out. In our experience this is for a wide range of reasons, and there are many R&D myths floating about.

Some SMEs wrongly believe they are too small to claim, when in fact the size of the company is irrelevant. Others think the relief can only be claimed by science laboratories and large tech conglomerates. This is again untrue because any company of any size and in any industry can actually make a claim.

Then there’s the actual process of claiming (and we’re the first to admit that it’s certainly complex and time consuming). With rules around claims often being updated by HMRC, and the fact it’s so hard to understand what costs can be included and what can’t, claiming R&D Tax Credits can be daunting. Over-claim and you leave your company exposed to an audit by HMRC. Under-claim and you leave behind potentially many thousands of pounds that rightfully belongs to your company. It’s not hard to see how potential claimants get put off before they even start.

Tax Cloud makes SME R&D tax claims easy

"Great platform for R&D tax credits and a very helpful team + one of the most affordable fee structures I've seen in the market. Highly recommended!" - Outi Maria Pietilänaho, Co-Founder, Vimma Ltd.

Developed by the R&D specialists at Myriad Associates back in 2017, the Tax Cloud portal is the perfect fully-guided online solution to compiling and submitting your R&D Tax Credits claim. Not only that, but thanks to the easy to follow step-by-step process you know all your eligible R&D costs have been included with nothing left behind.

It’s simply a case of signing up for free and booking a demo (again free) to see how it works. Then, follow each step to input details of your company, your project and your expenditure with the full support of our experts. The next stage doesn’t unlock until the last one has been reviewed by our team and feedback given, so by the time your claim is submitted you know everything is covered.

By using Tax Cloud you’re also keeping fees super low, with nothing to pay until your award has been paid. So you literally have nothing to lose and potentially thousands to gain.

Get started with Tax Cloud for businesses today or get in touch with our team for an informal chat.

 

 

Barrie Dowsett, ACMA, GCMA
Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud
Start your Tax Cloud claim now Discover if you qualify and ensure your R&D tax claim is maximised. Get started
Powered by Myriad Logo

Myriad Associates helps businesses maximise tax reliefs and secure R&D grant funds. We specialise in R&D Tax Credits, Video Games Tax Relief, Innovate UK grants, Horizons 2020 grants, and Research and Development Capital Allowance Claims.

  • Submitting R&D tax claims since 2001
  • 100% success rate
  • Over £100m claimed and counting
  • Industry leading specialists
  • In-house technical, costing and tax experts
  • Member of the Research and Development Consultative (RDCC) committee

Meet some of the team behind Tax Cloud

Barrie Dowsett Barrie Dowsett ACMA CGMA Chief Executive Officer
Lisa Waller Lisa Waller CTA, ACCA R&D Tax Manager
JEan Rollinson Jean Rollinson Senior Technical Analyst/Writer
Rabia Mohammad Rabia Mohammad Corporate Tax Associate