Industry reports suggest that many companies are still missing out on the opportunity to claim this valuable tax relief. This is probably because many business owners don’t realise that their company’s activities may qualify.
There’s still a perception that research and development reliefs can only be claimed by companies carrying out purely scientific, laboratory type research. In reality however, this is far from the case.
The definition of research and development is drawn very widely and includes any significant advances in product development, process development or advances in software and systems.
If your business has developed a product or process that would impress your competitors, or if customers come to you to make them something they can’t get anywhere else, there’s a good chance that you’ve been engaged in research and development activity. It can also apply when you’ve been developing your internal systems and processes, as well as your external products.
Even if your company has been unsuccessfully attempting to develop new systems or products, then this can still count as a qualifying activity. The government is actively encouraging research and development in the UK and claims tend to be looked on favourably.
For small and medium sized companies the benefit of making a claim is:
‘That the company receives a 225% tax deduction for the costs of its qualifying research and development activities, including the staff costs of the employees engaged in the R&D.‘
If the company is loss making, or becomes loss making as a result of the research and development claim, it can opt to receive an immediately repayable cash tax credit. This can be an extremely valuable boost to cash flow.
The relief is not as generous for large companies; however, it is still beneficial to make a claim.
My advice if you’re a company director, is that it’s worth thinking about the activities undertaken by your business and considering whether there may be a project that could qualify for this tax relief.
If you think there might be an opportunity, we can help – given our considerable experience of negotiating claims for a wide range of clients. If you want to chat through your position and options, feel free to call me on 01254 604363 or email firstname.lastname@example.org
Claire Astley – Tax Manager, PM+M