The door could be closing on R&D Tax Credits for April accounting dates
The two year opportunity to claim Research and Development (R&D) Tax Credits is soon drawing to a close for businesses with upcoming year-ends.
HMRC stipulates that companies can claim R&D tax relief for an accounting period that ended during the past two years. This effectively means that any businesses adhering to an April accounting date (which many do) have until 30th November 2019 to make their application for qualifying R&D expenditure incurred up to 30th November 2017.
R&D Tax Credits are a welcome lifeline for many companies, providing a chance to claim a generous tax deduction against their innovative projects. But many claiming opportunities are unfortunately often overlooked, with company directors over-estimating the level of innovation needed to claim. This is why it is so important that as a company accountant you know what innovative projects your clients have completed (or plan to complete) so you can flag up any eligibility for R&D tax relief.
In a nutshell, projects that are eligible for R&D tax relief must seek to make an appreciable improvement in technology or science. Therefore, if your client is paying specific staff to solve a scientific or technical problem there may well be scope for a claim. This is especially the case if the company is:
- Looking to modify a manufacturing process or product
- Developing bespoke software
- Creating a new system, service or product from scratch
How does R&D tax relief work?
The government wants companies to innovate and grow as this has a positive effect on the whole economy. It does this by offering qualifying companies the chance to obtain a rebate on their Corporation Tax to help with the costs incurred. The relief is provided either by reducing taxable profits, or by increasing (or creating) tax losses which can be offered to HMRC in return for a lump sum payment. It’s a very well-received and generous relief, with SMEs incurring £100k of qualifying costs able to save as much as £25k in tax.
At Myriad Associates we will focus on quickly and accurately assessing a company’s eligibility for R&D Tax Credits to ensure that their claim is completed as painlessly as possible. We also make sure the claim is maximised to its full potential and is 100% compliant - this is something we would be pleased to help you with.
So if your client’s company year-end is coming up, why not speak to a member of our friendly, expert R&D advisors who are on hand to help. The Myriad Associates team:
- Deal primarily with R&D claims. We’re not interested in poaching your clients or carrying out general accounting - we only do R&D. This makes us experts in our field
- Is made up of a mixture of professionals including accountants, administrators and R&D tax relief experts who specialise in reviewing and processing R&D tax relief applications for accuracy
- Has robust quality control procedures in place ensure each claim for R&D tax relief is fully compliant
- Is proud of the strong relationship it has with the clients and accountants it works with, and with HMRC
Is your company eligible to claim R&D Tax Credits?
R&D Tax Credits were launched as an incentive to innovate using the UK tax system. We’ve found that a large number of business owners actually over-estimate the amount of innovative work required for a claim, when often all that’s needed is an appreciable improvement to technology or science - regardless of the industry or sector.
R&D Tax Credits can only be claimed by:
- Eligible UK companies
- Undertaking relevant R&D projects
- Incurring application R&D costs
What R&D projects may qualify for R&D tax relief?
What comes under the umbrella of R&D with regard to tax is extremely broad. A huge range of innovation types could potentially be eligible and it’s not just about laboratories and people in white coats. Essentially, if your client is paying people to solve technical problems then an eligible claim is likely. Even if the project itself fails, the very fact that it looked to address a specific scientific uncertainty means it probably qualifies.
And what are the qualifying costs exactly?
We’ve often found there is some confusion when it comes to which R&D costs are eligible for the relief. It is therefore vital to correctly identify the qualifying costs when preparing a claim.
To clarify, expenditure must have taken place on any of the following:
- Staff costs (including wages and certain employer-reimbursed expenses)
- Employer pension contributions and NICs
- Computer software
- Consumables used directly in the R&D work, like materials, tools and prototypes
- Fuel, water and power used up in the R&D process
- R&D subcontracting costs as well as externally provided workers. This could be agency staff or freelancers for example
Why do so many businesses still fail to claim R&D?
The government strongly encourages businesses to claim and indeed the scheme isn’t new; it’s been around since the year 2000. In our experience we have found a failure to claim is often due to:
- Not knowing the scheme exists
- Not realising that innovative work is actually going on (this is particularly the case in larger companies)
- Believing it’s only for bigger companies and/or doesn’t apply to them
- Being worried about making an application correctly
- Having no time to do it
- A fear that putting in a claim may give HMRC the chance to start asking unwelcome questions
These are all easily resolvable and should be - after all, companies that don’t claim the R&D Tax Credits they’re entitled to could well be missing out on thousands of pounds of extra money. Can your clients afford not to?
Let us help you provide your clients with effective R&D tax relief advice
If you’re an accountant dealing with clients undergoing any R&D work then it’s well worth making them aware of the R&D Tax Credits scheme. However, the process of applying for R&D Tax Credits is often complex and mistakes can be incredibly expensive - this is where Myriad Associates can help.
Whether you’d like comprehensive guidance on helping your client make their application or just have a quick question, we’re here to help. Call us today on 0207 118 6045 or use our contact page so you can rest assured your client’s R&D Tax Credit claim is sorted.