A brand new business usually has a handful of innovative people running it. While your long-term goal might be to have thousands of employees, you’re not there yet. Your business can apply to Research and Development (R&D) tax credits as long as you have fewer than 500 employees and less than £100 million in turnover annually, which qualifies your business as a small and medium enterprise (SME).
With this government grant scheme, your small company can receive a rebate, with no hidden fees, and no payback. The R&D grant scheme is not a loan, but instead, a means to incentivize small and medium-sized businesses to do creative research and development.
Can brand new businesses qualify?
Yes! The goal of R&D credits is to encourage small and new businesses to thrive, and even brand new businesses can take advantage of the rebate. The R&D credits can be applied once the first year of accounts is completed.
How does R&D credit work?
An SME claim for R&D credits adds an additional deduction to your company’s corporate tax calculation. The additional deduction is the company’s initial R&D costs, multiplied by 1.3 resulting in the R&D enhancement.
A taxable profit will be reduced by the enhancement and can reduce the tax bill entirely. In the event that the company experienced a loss, or a loss was created by the R&D credit enhancement, the government will then pay the company, thus, the R&D credit. Any given SME company can receive up to 230% of the R&D costs.
The government wants to incentivise small and innovative businesses, and by offering business funding, this can go a long way in helping your new small business succeed.
Curious if your business qualifies for the incentives?
Here are the prerequisites for your business to take advantage of the credit:
- Fewer than 500 employees.
- Less than £100 million in turnover annually.
- UK limited company with a registered office in the UK.
- Involved in the process of creating, developing, or researching a new process, device, product, material, or service.