The R&D Tax Credit scheme was introduced in 2000 by the UK government to encourage businesses to conduct research and seek innovation in their respective sectors. The idea behind introducing it was to stimulate global competitiveness by allowing companies to reclaim some of the money invested in qualifying research and development.
The R&D Tax relief scheme is an ideal way of gaining funding support for SMEs and larger companies. But it is small businesses who stand to benefit the most from the scheme as they can recover up to 26% (if in profit) and 33.35% (if loss-making) of all eligible R&D expenditure. R&D tax credits are issued either in the form of cash payment, a corporation tax reduction, or a combination of both.
Even though R&D Tax Credits are an ideal way of receiving tax relief or cashback, which can be re-invested to seek innovation further, several small businesses are still missing out on this attractive funding option. Many are unaware of the scheme, while others think their R&D work would not be eligible. But there are several costs incurred in pursuit of R&D that could qualify for R&D Tax Credits, such as:
- Software Licenses
- Heat, Electricity, and other Utility Expenses
- PAYE, National Insurance and Pension Contributions, Bonuses and Employee Expenses
- Outsourced Qualifying R&D
- Material Costs
- Maintenance, Administrative and Security Expenses
Why Should Small Businesses Not Miss Out On R&D Tax Credit Claims?
Although it may seem like a hassle, making an R&D Tax Credit claim can be straightforward when done with the help of experts. More importantly, the benefits of an R&D Tax claim outweigh the efforts involved in writing and submitting it, especially for SMEs. Here’s why small businesses should not miss out on this scheme:
- Businesses From All Industries Can Apply– Not just science and technology, innovation in all industries is eligible for R&D Tax relief. Companies from sectors such as construction, agriculture, food and beverage, manufacturing, cosmetics and more, can apply for tax relief under this scheme as long as they are conducting R&D and pursuing innovation at some level.
- No Minimum R&D Expenditure – From 2012, there is no minimum qualifying expenditure a business needs to spend on R&D to qualify for R&D Tax Credits. Even small businesses that spend as little as £5000 towards R&D could be eligible for cashback or R&D Tax relief.
- Failed R&D Projects Could Also Qualify– Success is secondary when it comes to claiming R&D Tax Credits. Your small business can claim for qualifying expenditure even if your R&D project has failed. It gives SMEs a crucial funding boost to re-start their work and try and achieve innovation in their field again.
- Ideal Way of Gaining Funding for Re-Investing in Business – Finding the appropriate funding sources can be challenging for small businesses. But if your company performs R&D as part of business development, the R&D Tax Credit scheme is the perfect way of swiftly gaining funding that can be re-invested to grow the business.
If you have been putting off making an R&D Tax claim, now is the time to do it! The best way of ensuring that you cover all qualifying costs and maximise your cash payment or tax relief is by working with an R&D Tax expert like Datafox. Our specialist team has the knowledge and experience of making successful R&D Tax Credit claims for small businesses from several different industries. Give us a call on 0800 035 2510 or email us at firstname.lastname@example.org to check your eligibility or learn more about making a claim.