How To Identify A Potential R&D Tax Relief Claim Amongst Your Business Clients
Research and development (R&D) Tax Credits provide an attractive financial boost to businesses large and small right across the UK. Eligible companies can receive up to 33p for every £1 they spend on their innovative research and development activities. That's a sizeable sum for any business, and one which could make all the difference, particularly in these challenging times. Thanks to our years of first-hand experience, we can support both accountants and their clients in making an accurate, complete and maximised R&D tax relief claim. We’re independent specialists dealing only in R&D tax and nothing else, leaving you to work on their more general tax issues.
What shape does R&D tend to take for businesses?
The answer to this question depends on a huge number of factors, including the size of the business and what industry it’s in. It’s perhaps not surprising however that for many businesses and their accountants, working out if eligible R&D has actually taken place is not always straight forward. Luckily, the government definition of R&D is purposely very broad, meaning that any UK company can apply regardless of sector.
If you and/or your clients aren’t sure whether the innovative work their company has recently undertaken is classed as R&D, then let us guide you. Making a ‘DIY’ application, even if your client has made one before, is strongly discouraged as it’s much less likely to be successful. At best a claim can be rejected, and at worst your client can end up with a hefty fine and/or an HMRC investigation. These of course are always best avoided.
So when it comes to working out what specific R&D a company has undertaken, why not get in touch with our team.
Our company doesn’t involve any labs or scientists - surely R&D tax relief doesn’t apply to us?
A common misconception is that R&D is something only large, cash-rich companies carry out in a laboratory. However, this isn’t the case - R&D can happen anywhere in any company, from manufacturing to agriculture to healthcare and everything in between. Even the smallest companies can benefit too, as there’s no minimum claim amount.
R&D is simply about taking a scientific or technological step forward. This could be by designing or improving a product, service or process, or by improving an existing one. Many of our clients have also been surprised to learn that small in-house projects and system changes have been eligible for R&D Tax Credits over the years.
Does your client’s business qualify?
There are three key indicators regarding whether your clients’ business will qualify. It’s well worth becoming familiar with them to help you spot a potential R&D claim:
Firstly, as mentioned, it’s critical that the company is currently undergoing (or has recently undergone) R&D work that aims to make an advancement in science or technology. We can’t emphasise this enough. It also has to be of wider benefit across the field, not simply to your client’s business only. It’s also not enough to just talk about the project when making an application for R&D Tax Credits; companies need to clearly demonstrate what scientific or technological advancement was made too.
Secondly, only companies that are liable for Corporation Tax are eligible to claim R&D Tax Credits. They must also be UK based.
Finally, your client’s company must be a going concern with the latest accounts having been prepared as such. There must also be nothing in the accounts to indicate the business is unlikely to remain trading in the near future.
If your client’s company meets the above criteria they will be able to claim in respect of revenue expenditure, for example wages, utilities and premises. Capital expenditure is treated separately using R&D Capital Allowances.
With such a generous relief on offer, why aren't more companies getting involved?
In our many years’ experience, we’ve found it’s often simply that companies shy away from what can be a very complex, niche area of accounting. Other reasons include:
1. They don’t know about them
Quite simply, many companies, particularly start-ups, don’t know the R&D Tax Credits scheme exists. Some think they’re not in the ‘right’ business or sector, or that their claim amount will be too small (not true).
2. They think they’re not eligible as they’ve made a loss
The R&D Tax Credits scheme is open to any UK company, including loss-making ones and start-ups. If this is the case for one of your clients, they can carry the loss related to their R&D activities forward for offsetting against future tax liabilities. Alternatively, they can surrender it for a cash payment - which is likely to prove very handy.
3. Sometimes their accountant gives them poor advice (don’t let this be you)
Another thing we’ve unfortunately come across during our time in business are start-ups who have received inaccurate advice from their accountant. This has then lead them to believe they’re not eligible. As a multi-disciplined business accountant it can be difficult to keep up with all the legislation and nuances in relation to R&D tax relief specifically. Mistakes are extremely easy to make, but unfortunately they can mean big losses for your clients.
Work with us to give your clients the most up-to-date, complete tax advice service
As your clients’ trusted business accountant, you’ll deal with a range of tax issues day in and day out. Amongst untangling figures, dealing with queries and filing returns, maintaining a firm grip on R&D Tax Credit applications is just another thing on your to-do list.
At Myriad Associates (developers of Tax Cloud UK) we deal only with R&D tax relief claims and will work with you in putting your client’s claim together. Not only will this mean you and your clients are reassured of success, the claim itself will be optimised for maximum return.
The Tax Cloud portal for accountants itself is also expertly designed to allow you to enter your client’s own figures and work out their claim amount using the built-in calculator. Offering a good value, more self-guided approach to R&D applications, the portal is ideal for those with more straight forward tax affairs particularly. Why not try it today?