R&D tax credits allow companies to recover a proportion of their expenditure on research and development (R&D).
For accounting periods starting on or after April 1st 2024, the previous two schemes – RDEC and SME – were merged so that R&D tax relief will be 20% on all qualifying expenditure, regardless of company size.
The exception is for loss-making SMEs classed as being R&D intensive – those which spend more than 30% of their total expenditure on R&D – who will receive a 27% tax credit.
Companies which utilise capital in the development of products, services and/or processes are entitled to a source of funding that is non-repayable, applicable to businesses of all sizes, across all industries, with no minimum spending requirement.
The benefits of an R&D tax credit claim are as follows:
1 Cost Savings
R&D tax credits provide businesses with an opportunity to offset expenses associated with the research and development of products, services and/or processes such as employee wages, supplies and equipment, reducing the financial burden and risks associated with innovation. For expenditures to successfully qualify for the R&D tax credit scheme, the project must aim to make an advancement or resolve a problem in science or technology.
2 Increased Cash Flow
Utilising R&D tax credits enables companies to either procure a cash refund or a reduction in their tax liabilities, enabling them to retain a larger portion of capital available in order to reinvest in R&D incentives or other areas of the business.
3 Competitive Advantage
The active pursuit of R&D activities and leveraging tax credits furthers a company’s competitive advantage through the enhancement of their own capabilities and ability to position themselves favourably in the marketplace.
4 Talent Attraction and Retention
R&D tax credits provide companies with greater opportunities to attract and retain talent in their field. The availability of tax incentives can vastly increase the attractiveness of a company in the perception of skilled professionals, due to increased flexibility and growth potential.
Overall, R&D tax credits are advantageous for companies and the economy as a whole, with every £1 spent on R&D in the public domain providing £1.40 of R&D private investment, with a net economic benefit of £7 for the UK.
Tax credits greatly reduce the risks involved in expanding and developing a business, allowing companies to strive for market growth and a competitive advantage due to a reduction in the financial burden of a company’s owners, shareholders and/or investors.
Call our team today on 01332 477 070 for a free, no-obligation eligibility consultation.
