You may have heard about R&D tax claims, but have you ever had a proper think about whether these could apply to your business?
What are we talking about here? Put simply, if you can prove to HMRC that your business has spent money on qualifying research and development costs, they will give you a tax credit. So a reduction in the Corporation tax your business owes if you’re profitable, or they will pay you a cash tax credit if you’re loss making and not paying tax yet.
Why? It’s a scheme to help fuel innovation in the UK. It’s meant to reward companies who are bringing new products and services to market, who may have taken some risks along the way.
What sort of spend qualifies? You may well qualify if you’re involved in the following:
- Developing new products, systems or processes
- Advancing an existing product or system
- You employ technical staff, software developers or any scientific staff – this could be directly employing or working with 3rd party contractors
- You can show you are overcoming technical uncertainties
How much do you get? For profit making SME businesses you will get up to 25% rate of relief. For example if your qualifying spend was £100,000 you could get a £25,000 reduction to your tax bill. If you are loss making you can get up to 33% back in cash as a tax credit.
How do I go about it? You’ll need to work with someone who’s qualified to submit an R&D claim. You’ll need to identify the qualifying R&D spend, and then prepare a narrative for HMRC. This is a written document which explains how you have satisfied HMRC’s standard list of questions. The claim is submitted as part of your annual Corporation tax return.
Think you might be eligible? Drop us a note at hello@pennybooks.io – we’ll help out.
Elspeth Vincent
