Research and development (R&D) tax credits are still an untapped source of funds for UK small businesses, according to newcomer Tax Cloud.
Many companies and advisers are not aware of R&D tax credits or misunderstand the criteria, according to Tax Cloud CEO Barrie Dowsett.
“The R&D tax relief process can be confusing for those that haven’t gone through it before and many businesses are under-claiming,” said Dowsett in a post on Tax Cloud’s industry insights page. “This means that many SMEs are missing out on tax credits that could amount to tens of thousands of pounds.”
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Small businesses that pursue science or technology advances can be eligible for R&D tax credits regardless of the industry they operate in. In order to qualify, the project must contain a level of technical uncertainty and take a risk by trying to innovate, improve or develop a process, product or service.
To expand the reach of these incentives, London- and East Midlands-based R&D tax consultancy Myriad Associates launched the online R&D tax credits system late last year and has already gained more than 100 clients.
The idea is simple: the online platform guides small businesses through the R&D tax claims process. The tax credits are available for companies that incur costs developing products, processes, software or services, and can recoup up to 33.35% of a company’s R&D spend as a cash repayment.
After a company signs up, Tax Cloud automatically verifies the details through Companies House. The firm can then enter the description of its R&D projects and their costs. The information is reviewed on Tax Cloud, which responds with feedback and recommendations.
In the final stage of the process, the claimant receives a compiled report ready to be submitted to HMRC.
Although there is no upfront fee for using Tax Cloud, users pay 3.5% of the company’s R&D expenditure once the claim has been successfully processed by HMRC. This arrangement is equivalent to 10.4% of the corporation tax savings for a loss-making business and 13.5% of the corporation tax savings for a profit-making business, the company said.
“For small businesses, these savings can have a huge impact, allowing them to further invest in their operations and team,” said Dowsett. “Tax Cloud is all about making these vital R&D reliefs more accessible to the businesses that are developing new or improved products, processes and services across a huge range of industries.”
Tax Cloud recently launched a partner programme. “Introducer” partners who sign up for the programme get a 10% referral fee for each client that goes through the R&D tax claim process and whose claim is successfully processed by HMRC.
Certified partners, on the other hand, need to undertake training to be able to access Tax Cloud on their clients’ behalf and receive a 20% partner fee, which incentivises accounting practices to encourage clients to raise R&D tax credit claims.
Tax Cloud will be demonstrating its online platform and sharing information about its partner programme at Accountex 2018 on 23-24 May at ExCeL London.