R&D is short for Research and Development. Many businesses undertake 'R&D' at some point, whether it is developing new products, services or processes; or improving existing ones. In order to encourage companies to make these advancements, the government introduced what is widely known as R&D Tax Credits - a valuable tax relief that rewards UK businesses for investing in innovation.
HMRC's definition of R&D for tax purposes is intentionally broad, allowing the initiative to be applicable in any industry. Companies in any sector may be eligible, and sectors where R&D is most frequently undertaken include:
and many more!
Regarding the types of projects that may be eligible, R&D Tax Credits may be claimed when you undertake work...
Developing a new product
Developing a new process
Improving an existing product
Improving an existing process
Projects don’t have to be ‘ground-breaking’ to be eligible – it could be that the product or service that you are working on is already out there, but you are working on adapting and improving it.
What about the money we've spent on 'failed' projects?
For something to be classed as 'R&D', you'll be pleased to hear that it doesn't need to have been a successful project! You can claim for all eligible projects regardless of whether or not they have achieved their objectives, meaning that failed or terminated projects may also qualify. It’s about the pursuit, not the outcome.
How could my business benefit from R&D tax credits?
Ultimately this government initiative is designed to provide a financial incentive to undertake R&D in your business. Depending on whether your business is making a loss or a profit, the benefit is either received as a cash payment, a corporation tax reduction, or a combination of the two. The benefit can be equivalent of up to 33p for every £1 of qualifying expenditure, so the cash benefit to the business can be very significant. If eligible, you can typically claim R&D tax relief for your last two completed accounting periods. In other words, whilst in your accounting period ending 2019, your claim can consider R&D costs in your accounting periods ending in 2018 and 2017.
Help2Grow can help you assess whether your company could potentially benefit from this government incentive. We'll work with you to identify whether you've had any eligible projects within these periods, and our Chartered Tax Advisor partner will assist at each stage to help clarify which costs qualify.
How much could I claim and how long will it take?
How much you can claim depends on multiple factors, so the best course of action is to arrange a free initial consultation with a member of the Help2Grow team and we'll help you to establish the size of your potential claim. It is worth noting however that the average claim made by SME's in the UK was over £50,000 in 2016/17, and there's nothing to lose by exploring your company's potential for a claim.
Regarding how long it will take, firstly there's the part of the claim that requires a little of your time. We understand that you're busy, so we make the process as simple, straightforward and swift as possible. In most cases we shouldn't require much more than half a day of your time in order to obtain the information that we require to compile your claim documentation. Once we've submitted your claim to HMRC, they aim to deal with SME claims within 28 days, so often you can receive the benefit within four - six weeks from the date of submission.
How do I know if my business will be eligible?
Having assisted many clients from a wide variety of sectors with this process, we recognise that this benefit often goes unclaimed by companies for various reasons. Sometimes they know little or nothing about this relief, where as other times their accountant may have told them that they are not eligible. Help2Grow will work with the people that know your business best to help establish whether or not your organisation could benefit, and our Chartered Tax Advisor partner specialises in assessing what is and isn't qualifying R&D.
Employing the services of a chartered tax advisor sounds expensive - how much does the service cost?
We only charge a small % fee based on the credit you receive from a successful claim, and we can discuss this with you during the consultation. There are no add-ons, bolt-ons or hidden fees, and we don't charge if your claim is unsuccessful.
Contact us today and we'll arrange a free consultation with no obligation. If you wish to proceed then there is no upfront cost. Please note that no claim is too big or small – Our Chartered Tax Advisor partner has experience of working on claims from a few thousand £'s up to £4 million.