Businesses grow by increasing sales. The more you sell, the higher the revenue, the quicker your business will grow. However, there are ways to accelerate your business growth without the constant need for new sales or customers, and these rest largely on one key element – innovation.
Innovation does not refer only to new products or ideas but can apply to new ways of doing things, such as altering business models to better suit the needs of customers and staff or adapting processes to improve the end product or service. All of these innovations could potentially help your company sell more. But such innovations usually require considerable time and financial investment before they become commercially viable. There is also the risk of not all “innovations” proving to be successful.
R&D Tax Credits are a form of government tax relief, that’s designed to reward and encourage greater innovation across the UK business sector and can amount to tens, even hundreds of thousands of pounds, every year. These are sums that can make a difference to your business. But despite the large pool of capital, the vast majority of companies that are potentially eligible for these valuable tax credit rebates have never made a claim.
There are three key reasons for this:
- Businesses do not realise their activities make them eligible for R&D tax relief
- Businesses do not know how to go about making a tax relief claim
- Businesses worry the claim process will be too time consuming and costly to be worth the effort
So how will business owners recognise these issues?
There is still a widely held assumption that R&D applies only to scientists when it actually refers to innovation in many different forms across all sectors. R&D tax relief was introduced by the UK government in 2000 to encourage innovation by British companies to support economic growth and spur success.
HMRC was mindful to ensure that business owners truly understood the definition of what qualifies, as Research & Development could be applied to a wide range of work. Any project that can be shown as seeking to resolve a “scientific or technological uncertainty” qualifies as R&D. This can take the form of a new process, product or service, or it can simply be an improvement to an existing one.
R&D doesn’t even have to have been successful to qualify and claims can be made for two years from the end of the tax year in which the work takes place. R&D tax credits can help to reduce a limited company’s corporation tax bill or be claimed as a cash sum reimbursement from HMRC if the company is loss making.
Completing an R&D tax credit relief claim can be challenging. It’s easy to get it wrong. This is why many companies choose to save themselves many valuable staff hours and potential pitfalls by working with a tax relief specialist.
First published by EFM on 20th May 2019.