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Are you one of the 97% of eligible companies who hasn’t made a Research and Development claim?

The government are encouraging all forms of innovation and view it as a priority. That is why they are making it easier for companies to access valuable tax credits.

Alongside the common misconception that Research & Development is only meant for the guys in the white coats, there is another which implies that to take advantage of R&D tax credits you must be profitable for it to be worthwhile. However, the reality is different.

Putting time and effort into research and development may not be generating profits currently for your company, but being an innovator in your sector should reap rewards surely? Loss-making companies are also just as eligible as profitable companies for R&D relief as the developments are still being sought. To recognise the R&D work undertaken by loss-making companies HMRC allow them to claim a tax credit equal to 14.5% of the enhanced R&D expenditure. For those running at a loss, such a cash injection could prove invaluable.

For instance a loss-making company spends £50,000 on qualifying R&D. They are entitled to increase this by 130% meaning that their enhanced R&D expenditure is £115,000. The company can elect to surrender this £115,000 for a 14.5% tax credit equal to £16,675 which will be refunded by HMRC. The upshot is that of the £50K spent by the company on R&D, HMRC have effectively contributed one third.

Even if you are doubtful about whether your project qualifies, a brief conversation with a specialist could add clarity.

As always, any queries please contact Richard or Jason on 0845 054 8560.

As the giving season is on its way and many have already started present planning. We have answered your festive tax questions to help make gift giving a little more cost effective, as it seems the tax man isn’t as generous as Santa.

Christmas Parties:

Having an annual function any time of year is an allowable tax deduction for a business. Employers can spend up to £150 per head on annual staff events without it being treated as a taxable perk. But be careful, if you spend £151 per person the whole amount becomes a taxable benefit for the employee.

Client Entertaining:

If the event is predominantly for staff, you can invite clients without prejudicing the staff’s tax treatment as set out above.

Staff Gifting:

In previous year, the only gifts that have no tax implications are seasonal gifts such as a turkey, an ordinary bottle of wine or a box of chocolates. But from April 2016 non-cash vouchers can be gifted and employers can now benefit from the exemption.

Trivial benefits legislation came into action April 2016, making room for more benefits for staff and directors. For more information on the different benefits you can claim, contact us on 0845 054 8560.

It is a common misconception that the Research & Development tax relief is only available to companies who are working in new technologies or have people in white coats working with test tubes. However this is not the case as the relief is available to any UK based company which spends money on being an innovator within any respective field.

 

How it works

Companies which invest in new or existing processes, products or services are able to claim additional tax relief. Based on a profitable company paying corporation tax at 20% this would result in a tax saving of 26p for every £1 on top of the “normal” 20p tax saving. This means that the Government is contributing 46p towards every £1 of your R&D expenditure.

 

Do I qualify?

There are no restrictions on which industries qualify for the relief meaning that any company in any sector can qualify. If you can answer “Yes” to either of the following two simple questions there is a good chance you will qualify for the relief;

  • Are you spending money developing new products, processes or products or improving existing ones?
  • Do you employ staff to work on projects which advance the knowledge or overcome uncertainties within your trade?

 

How we can help

We have a successful track record in helping companies put together R&D tax relief claims in all types of industry sectors including manufacturing, software development, retail and leisure.

We will take a hands on approach led by a Chartered Tax Adviser to ensure that all qualifying expenditure is included in the claim.

We will prepare a detailed report setting out for HMRC the R&D work undertaken by the company and quantifying the tax relief due and submit this to HMRC along with amended Tax Returns where necessary.

In the event that HMRC raise questions in relation to the claim we will answer these on behalf of the company.

All of our work is undertaken on a contingent fee basis meaning that if, after discussions it is concluded that the company does not qualify for R&D tax relief or, for whatever reason, HMRC do not accept the claim, we will not charge a fee.

Please get in touch on 0845 054 8560 for a no obligation meeting.