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The outbreak of conflict in the Middle East signals a difficult time for the world.
Among a plethora of concerns about the safety and well-being of those impacted by the conflict, there are also fears of the impact that it will have on the global economy.
Energy and fuel prices are set to rise, pushing up the operational costs that are already causing many businesses to struggle.
For innovative businesses looking to carry on functioning, using R&D tax reliefs can be a way to manage rising costs.
How can R&D tax reliefs help with energy costs?
Beyond the typical costs that innovative businesses understand can be included in an R&D tax relief claim, there are a range of expenses that can legitimately be considered.
Consumable costs are a vital consideration, yet many innovative businesses struggle to understand how to utilise them effectively.
For accountants wondering how to help clients with R&D, understanding the apportioning of costs is essential.
Fuel, energy and water can all be included in an R&D tax relief claim to the extent that they are incurred during the course of R&D.
It is vital that innovative businesses do not seek to include the cost of any energy that is spent doing non-R&D related work.
HMRC do accept estimates of the apportionment of costs as they do not expect it to be precisely measured.
However, if the energy costs included in the R&D tax relief claim are believed by HMRC to be particularly high, then it is likely that the calculations will be questioned in an enquiry.
This is not to say that an innovative business cannot have high energy usage for R&D, some projects will inevitably require this, but these will be the outliers and should attempt to evidence the division more carefully than other businesses.
What other costs can be included in an R&D tax relief claim?
For accountants looking to help clients make the most of R&D tax reliefs, it is good to understand when consumables can be included in a claim.
The rule is that if something is irreversibly altered or destroyed by the R&D process, it counts as a consumable cost and can be included.
If it can be sold on, then it is excluded as it mitigates the financial risk that an innovative business incurred.
As operational costs continue to increase across the board, it is worth maximising R&D tax relief to improve the financial position of the business.
This needs to be done in a way that aligns with HMRC’s guidelines otherwise the R&D tax relief claim will be invalid.
As R&D tax consultants, we work with innovative businesses and accountants to make the most of R&D tax reliefs.
Speak to our team today to learn more about the true power of R&D tax reliefs.
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