Eligible companies can apply for R&D Tax Credits to offset their corporation tax bills, or as a cash rebate. However, there are still many companies that are unaware of this government incentive scheme.
For those business owners that are aware, there are still many basic questions concerning the scheme and the potential benefits that might be in store for their business.
Here are just some of the most frequently asked questions:
Can my business benefit from R&D tax incentives?
To benefit from R&D tax incentives, you must:
- Be a limited company in the UK that is subject to Corporation Tax.
- Have carried out qualifying research and development activities.
- Have spent or be spending money on these projects.
Do I have to be operating in a specific sector to qualify for R&D Tax Credits?
R&D can take place in any sector. It occurs in everything from cheese-making to chemical engineering, and construction to digital development.
What counts as Research & Development for the relief?
The tax legislation is purposefully broad. Whatever size or sector, if your company is attempting to ‘resolve scientific or technological uncertainties’ then you may be carrying out qualifying activity. This could include:
- Creating new products, processes or services.
- Changing or modifying an existing product, process or service
If you’re not sure if your project is eligible, or you don’t know how to achieve it in practice, you could be resolving technological uncertainties and be carrying out qualifying R&D.
Furthermore, R&D doesn’t have to have been successful to qualify.
Does the project have to be my idea?
R&D relief is available for all R&D regardless of where the idea springs from. Sometimes you will be working on a client’s project and sometimes you will be working on something internal. You can claim for both, subject to certain restrictions.
Where does R&D start and finish?
R&D work begins when a project starts to seek an advance in science or technology, and ends when the project’s uncertain elements have been overcome. Any user-testing or commercial marketing work beyond overcoming the project’s uncertainties will not be R&D. The advance need only be appreciable (large or important enough to be noticed), it needn’t be a brand new novel patentable concept – a “step-change” is enough.
What kind of projects do not qualify for R&D tax credits?
Generally, routine copying of existing products, processes, materials, devices or services, will not usually qualify as R&D. Working to improve the cosmetic or aesthetic qualities of a process, material, device, product or service will not in itself qualify as R&D. However, working to create certain cosmetic or aesthetic effects through the application of uncertain technology can still qualify as a claim.
You may well have questions around R&D Tax Credits. To find out if you’re eligible for a claim, get in touch with the EFM team. Email or call 01582 516300 to set up your free one hour consultation.