Anyone who’s been in business long enough knows that almost everything related to tax is complex and can be extremely frustrating. That said, the benefits of making the effort to apply for relief can vastly outweigh the disadvantages. In the case of research and development tax credits, there are multiple advantages to pursuing a claim. Here, we outline four of the key reasons why you shouldn’t miss out for the sake of a little less paperwork.
It’s a financial reward
The biggest and most obvious benefit of applying for the relief is the financial reward. The reason the government introduced the incentive was to encourage companies to further knowledge in the scientific and technological realm by carrying out R&D. So it’s keen to reward qualifying efforts – whether they succeed or not. Small and medium-sized businesses (SMEs) can claim back what they’ve spent on a project plus an additional 130 per cent. That means for every £100 spent, the reduction in your Corporation Tax bill amounts to £230.
You can fund further projects
The relief you receive can be put back into your business. You may choose to purchase new equipment or software, hire new staff or fund a new research project with the reward. Either way, it’s a significant cash injection that can enable your company to grow, which in turn can benefit the economy.
It gives you a competitive edge
Furthering insight into science and technology doesn’t only benefit your industry (and potentially others) as a whole – it can help your organisation to gain a competitive advantage too. Perhaps your research – and the subsequent tax relief – will enable you to develop better products or more efficient processes, and offer them to consumers at a reduced price. The advantages of this are obvious and could soon mean you’re at the forefront of your marketplace.
It could mean the difference between profit and loss
The R and D tax credit scheme was introduced to support scientific and technological endeavour, not success. So if your project fails or your business is making a loss, you are still eligible to apply for the relief. If you have made a loss, the cash injection could mean you actually finish the financial year with a profit – or at the very least, that you can continue trading for another year.
Making an application
Research and development work often requires your company to make a calculated risk in pursuit of better processes, products or services. If this sounds familiar, you could be eligible to make a claim for R&D tax credits. The application is made on your Corporation Tax Return, so you must be able to account for the expenditure related to the project.
To find out how much your claim could be worth, take a look at this r&d tax credits calculator. You should also take care to consult a specialist tax advisor, such as R&D Tax Solutions, before submitting your application. This will ensure you have the best possible chance of success.