If you’re not up to speed with your abbreviations, you may be wondering just what an ‘R&D’ tax credit is.
Put simply, it’s a Research and Development (R&D) tax relief or credit that can – depending on your situation – either reduce your company’s tax bill, or provide a cash sum. It’s based on the amount of money your company has spent on R&D.
And it might just be one of the best initiatives put into practice by HMRC. However, not many have come to realise its full potential.
The reduction in your tax bill (Corporation Tax) or cash sum comes from reclaiming up to 33% of your costs spent on research and innovation.
So, no matter if you’ve been hard at work inventing a brand new product, or tinkering with a shiny new computer platform, some of that money invested to make your idea a reality could – one way or another – make its way back into your business.
How Do R&D Tax Credits Work?
One of the best things about R&D Tax Credits is that it doesn’t matter if your business is profitable or not. And you can claim up to two financial years historically, if in that time you had invested in new manufacturing processes, or the development of new software or technology.
In short, this particular tax credit works by reducing your taxable profit, which in turn reduces your Corporation Tax liability.
That being said, if you’re not in profit, or you owe a small amount of Corporation Tax (or better yet, none at all) you will instead receive a cash sum instead of the tax relief. This can then be used to reinvest in your business and drive further innovation.
Claiming R&D Tax Credits
The claim is made up of two sections: financial data and technical data.
Where the financial data is concerned, you will usually be able to recover between 15 and 33% of your qualifying costs – that is to say, the money invested in prototype materials, developers, or any other expenditure required to support your R&D endeavours.
But here’s where it gets tricky. It wouldn’t be an HMRC initiative if we weren’t constantly dealing with shades of grey, and the R&D Tax Credit is no different.
Unless you truly understand the legislation like the back of your hand, it can be difficult to know which costs qualify, and how to support those claims with your technical data.
The Secret to Getting Approved
You can claim R&D Tax Credits yourself, but the fact is, your time will always be better spent doing what you do best – running your business.
The real secret to getting approved for R&D Tax Credits is to delegate to a specialist: Someone who knows how to optimise and maximise your claim; someone who files successful claims, day after day; someone who can minimise the chances of an HMRC enquiry.
Someone like Ten Forward.
We have already claimed thousands of pounds back for our clients via R&D Tax Credits, and with no upfront costs, and a no win, no fee approach, you literally have nothing to lose.
Contact us today for a no obligation consultation with one of our friendly R&D Tax Credit specialists.