If your company is carrying out research into a new process and is incurring costs and expenses as a result of its research, it may be eligible for an R&D tax relief. It does not matter whether the time, effort and costs invested will result in a successful outcome, as long as the company is engaging in R&D research by generating new knowledge and experimenting with unknown outcomes, it may be deemed eligible.
R&D tax allows companies to claim additional tax savings on the research costs they incur, helping to fund the technological advances needed to keep a company competitive. Receiving an R&D Tax relief reduces a company’s tax bill or provides it with cash if making a loss. It can be claimed by almost all companies across extensive fields of research.
The tax credits are available to small, medium and large companies. A small-size company (SME) is a company which has less than 500 employees and a turnover of less than €100m or a balance sheet of less than €86m.
SME’s are now permitted to claim an additional 130 per cent tax deduction for qualifying R&D expenditure as well as the normal 100 per cent. This means that SME’s paying tax at the small company tax rate can currently enjoy a tax saving of approximately 44 pence for every pound spent on R&D.
A further benefit is that if your company is currently making a loss then the losses attributable to the R&D costs can be surrendered for a cash refund from HMRC worth up to 14.5 per cent of the surrendered loss.
There are some important factors to note when determining the eligibility of your company’s project. The project must aim to create an advance in its overall field not just specifically within the company. Meaning that the advances and new knowledge generated need to relate to the whole industry not just purely to the company itself. Additionally, periodic alterations to existing products or processes do not qualify.
When lodging an R&D Tax claim, you need to be able to clearly describe the process, failures and successes of the project. The most efficient and effective way is to acquire an R&D tax credit specialist to guide you through the process. This ensures the R&D plans and application are lodged accurately and in accordance with all legislation and requirements.
If you believe your company could be eligible to receive an R&D tax credit, contact a Swanson Reed R&D tax specialists for a free assessment. We look forward to speaking with you and guiding you through the process of attaining your tax relief.