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R&D Tax Credits…So What’s it All About and How Much Can I Claim?

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This Article has been submitted by Lime R&D

Research and development (R&D) tax credits were created by the government in 2000 as a form of corporation tax relief available to limited companies.  Their purpose is to reward past R&D efforts and incentivise continued development work. By offering the relief the government seeks to foster a culture of innovation which in turn should promote economic growth.

Since their inception R&D tax credits have continued to get more and more generous. They work by rewarding qualifying companies with a substantial cash repayment or corporation tax deduction.

At the time of writing this article, a small or medium size company (SME) can receive up to 33.3p for every £1 spent on development activities, and a large company can receive up to 9.7p for every £1. This can translate into a significant cash payment to the claimant.

This is illustrated by the Government’s latest published statistics, stating that the average cash benefit obtained from a small and medium size enterprise (SME) claim is circa. £62,000. The average value for a large company is circa. £349,000.

Once received, the claimant company is free to spend the money as they wish – there are no restrictions.  Unlike other forms of investment such as a bank loan or equity, the cash does not need to be repaid nor do you have to give up any equity stake in your company. It is free cash.

As R&D tax credits are a form of corporation tax relief, they are only available to limited companies. The claim is made as part of your corporation tax return. This means that you are able to go back and make claims retrospectively. As you have two years from the end of your accounting period in which to amend your corporation tax return, by implication you have two years from the end of the period to make your R&D tax credit claim. As a result, most companies who are new to the relief tend to claim for two accounting periods together – making that first claim even more worthwhile.

Just to dispel a common myth, you do not need to be profitable to make a claim.  Often we hear companies say that they cannot make a claim as they haven’t made a profit yet – this is simply untrue.  A loss making company can still make a claim and receive a cash payment from HMRC.

Given the huge financial rewards on offer it is recommended that every company considers if they could be eligible for the relief.

Matthew Jones Founder and Managing Director of Lime R&D – Wales’ only firm of Chartered Tax Advisers specialising solely in helping companies make successful R&D tax credit claims.  As a dual-qualified Chartered Accountant and Chartered Tax Adviser, Matthew has a wealth of experience working with SME and large companies from all sectors throughout Wales and enjoys helping Welsh companies access this extremely valuable, yet underclaimed relief.

For more information about Lime R&D, please call 0330 223 4 223 or visit https://lime.tax

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Lime R&D is not your average tax consultancy. As the only firm of Chartered Tax Advisers dedicated to R&D tax credits in Wales, we pride ourselves on our refreshingly unique approach to Research and Development (R&D) tax credits which makes the claim process simple and straightforward.

We specialise exclusively in R&D tax credits – this level of specialism provides us with a more thorough understanding of the tax legislation, HMRC practice and how it could impact your business. Based in South Wales, we are passionate about helping Welsh companies from all sectors successfully claim what they are entitled to, which often equates to tens of thousands of pounds or more.

We appreciate that the claim process can be a little overwhelming. There is so much information available that it is hard to know where to begin. Our Chartered Tax Advisers provide a complete R&D service ensuring your claim is fully optimised, providing you with peace of mind and confidence, whatever your industry, size or structure.

More companies qualify for the relief than you may first think. You do not need to be undertaking cutting edge research to make a claim – this is the biggest misconception surrounding R&D tax credits. You simply need to demonstrate that your company has undertaken work which was not routine or easy to achieve. Our experienced advisers can help pull all the necessary information together and present it in the correct way.

All this can be done risk free – if you do not receive a benefit then Lime R&D won’t charge you anything! Contact us to speak to one of our specialist Chartered Tax Advisors.

 

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