The R&D tax incentive is designed to encourage everyone to grow development in their industry, but does that mean that everyone can or should claim? There’s a simple answer, and that answer is yes! R&D tax credits work for a variety of businesses in a variety of sectors. However, there are some instances where your claim for an R&D tax refund could be far higher than some other claims, so don’t hesitate any longer; instead, claim your much-deserved R&D tax relief.
randd uk ltd have been helping countless businesses get their R&D tax refund, so we’re somewhat of an expert on who has the best claim. We’ve outlined below 3 of the most common business situations that mean you should absolutely talk to an expert about whether you qualify for the R&D tax incentive.
In regards to R&D tax credits, an SME counts as a business that has less than 500 members of staff and a turnover of under €100m or a balance sheet total under €86m. If that describes your business, you’re in luck, as you’re probably eligible for an R&D tax refund claim! Why, you ask? Well, you’ll be hard pushed to find a small business – especially if it’s a start up – that doesn’t have to undertake R&D, most without even realising it.
Small businesses and startups often have to find innovative ways of solving problems, coming up with clever solutions that aren’t used in the wider industry by big companies, due to their comparatively fewer resources. The R&D tax incentive is there to encourage streamlined processes and new ways of doing things and this falls right into the style of work that we often see in SMEs.
Many SMEs don’t realise this, as they picture that those eligible for an R&D tax refund are people in laboratories with white coats developing the next rocket that will take us to Mars. However, that’s not what the scheme is about – those big R&D tech firms will have grants and the like to help them on their way.
If you’ve ever faced a conundrum in your small business that left the team scratching their heads before working towards a solution, that’s R&D; you can claim tax back on everything from their wages to the lighting they used whilst solving the problem. Even better news, the claim is much bigger for SMEs. As the Government outlays: “SME R&D relief allows companies to deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction.” With those figures, it’s absolutely worth investigating.
If Your Company Makes a Loss
It’s not so much that companies that make a loss are more likely to be able to claim an R&D tax refund; however, it is in this situation that it becomes most important to try. As with SMEs, there’s almost always an example of R&D within a company and if your company is making a loss it is more important than ever to claim back any tax refund that you are rightfully entitled to.
Claiming an R&D tax refund as a loss-making company gives you quite a few options. If your company has an R&D expenditure but makes a loss, you can “cash in” or “surrender” any R&D tax refund you successfully claim. This means there might be an option to allow the loss not to be carried forward by your company. There are a variety of different schemes tailored to suit different business types that can allow you to maximise your returns through this, so it’s highly advisable that you speak to an R&D tax credit expert (us) to find the best solution for your company. It could be the difference between another year of survival or a company going bust – and often is.
Companies That Use Subcontractors and Freelancers
Think you can’t claim R&D tax credits because you’ve outsourced the R&D? Think again! Your company is still investing in the growth of research and development in your industry, and therefore the R&D tax incentive applies to you.
In fact, you can claim a massive 65% of the costs incurred of paying for a subcontractor or freelancer. Even more important, they don’t even have to have done R&D work. As long as the work that the sub-contractor or freelancer did has been used towards the general R&D project, you can claim on all of the money you spent on using them. They don’t have to have done any R&D themselves. This is one of the most frequently overlooked elements of claiming R&D tax credits.
There are really very few restrictions on this. The freelancer or subcontractor doesn’t have to be a UK resident and the work doesn’t even have to have been carried out in the UK! The main condition is that the freelancer must provide actual work to the project rather than simply consult on it. As long as your subcontractor fits into this, and is unconnected from your business, you are eligible to claim back 65% of the costs incurred on paying them as part of an R&D project.
Should I Claim R&D Tax Credits?
As we said from the start, yes yes yes! However, in the situations above it’s even more of a good idea to look into making a claim for an R&D tax refund. Whether it could save your company from liquidation, as is often the case with a loss-making company, is designed to give you extra help and support as with SMEs, or subsidised your big outlays in outsourcing work for your research and development projects, R&D tax credits are there to be claimed by you! Yes, you! This government initiative is vastly under-utilised, meaning many businesses aren’t gaining back the tax relief they deserve, making it even harder to survive as a thriving business. Don’t let your hard-earned development go to waste.
Whether you’d just like some friendly advice to get you started, want confirmation that you’re eligible, or are ready to begin your R&D tax claim, the experts at randd uk ltd can help identify whether you have a claim and the best way to go about it. We’ll work with you to identify which parts of your work qualify as R&D and get you on your way to your R&D tax refund.
Call our experts today on 01332 477 070 or visit our contact page to send us a message. A member of the team will be in touch as soon as possible.