De-Mystifying R&D Tax Rebates / Credits

24th July 2019
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De-Mystifying R&D Tax Rebates / Credits

Taking advantage of what is available will help business improve

We have never lived in more innovative times, and this trend will continue as Tech increases, and AI becomes integrated into our daily lives. Businesses are working to make things faster, more efficient, increase load-bearing, operate within varying conditions…the list goes on.

Meeting the requests of an ever-demanding client to create a prototype, and possibly adapting an existing or new product or material to make it bespoke is common-place. There is now an expectation that businesses should meet their CSR targets and most would fully support the changes required to do that. In achieving a more ethical and sustainable work pattern, there are often changes which need to be made to meet those targets. If those adaptations involve a technological solution or some form of scientific change such as altering formulas in production — this could be qualifying R&D.

Why are so few eligible businesses claiming for what is rightfully theirs’?

Businesses are busy doing what they do, often what they have always done. Consequently, they don’t even recognise that their work qualifies them for a rebate or tax credit.

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Business owners think that the process is time-consuming and might open up tax enquiries within HMRC. Using a specialist organisation will reduce a business’s input to around 3-4 hours, well worth the time when you consider the reward. Also, the R&D claim is separate from corporation tax and so if you are entitled to claim, then you can claim. 

Mistakenly businesses often feel that R&D rebates are akin to a tax loophole or avoidance scheme…WRONG! If they qualify, they are entitled to claim.

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Tax is not a one-way street!

Accountants are (mainly) general practitioners, they are not trained in how to process an R&D claim, plus the onus is on ‘the client’ to inform their Accountant that they are doing R&D activity.

Often a project may have failed or not yet been completed; businesses assume that this disqualifies them— not true. A claim can go back two accounting years and often include work that was previously written off as a failed project.

Just because a business is not yet in profit, does not disqualify them from make a claim, but be quick, there are changes to the tax law in April 2020. You may need to take advise now! 

R&D Tax rebates are the governments’ way of rewarding innovation – They are just not particularly good at telling businesses…!