Bringing an innovative idea to life can be a costly business which can deter inventors or businesses alike from committing to the manufacturing process or indeed the initial design and research stages. During a pandemic, with so much uncertainty for many businesses, there is an even greater sense of caution.
R&D is an acronym for Research and Development. For over 20 years R&D tax credits has been the Government’s mechanism to encourage UK-based investment in innovation.
According to recently published research carried out by the Federation of Small Businesses (FSB) as much as 40% of ‘incorporated new-to-market innovators’ are not aware of R&D tax relief. In addition, only 10% of small businesses have accessed funding support from the Government. So, there are many businesses that don’t even know these tax credits exist, let alone that they qualify for them.
Essentially, if you are an SME business that:
• is liable for corporation tax;
• employs under 500 staff;
• has a turnover of less than £100 million;
• spends money developing new products, processes or services, or enhancing existing ones;
You are eligible for an R&D tax relief payment that may reduce your company or organisation’s tax bill.
The credit is made available in one of two ways: either as a tax deduction based on R&D spending or it may be possible for certain loss making small or medium sized companies (SMEs) to surrender their losses in return for a cash payment from HMRC. This payment can equate to 14.5% of the loss so it is not unsubstantial. This kind of financial relief will be welcome to many, especially in these unprecedented times of financial uncertainty.
We encourage our clients who may be eligible to investigate their eligibility to claim R&D Tax Credits. Anyone looking to claim R&D Tax Credits would be wise to seek advice from their accountant who will be able to set out the calculations and potential benefits. We can also support our clients in some parts of the preparation of their claim.
If you’ve got an idea you want to take to market, we will assist you through your journey. Our services can include trend spotting and feasibility of a new product, ergonomic studies and reverse engineering which could all be attributed to R&D.
Contact us today and learn more about our services and how we can help.
For more information about R&D tax relief click here
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