Research and Development (R&D) tax credit presents a fantastic opportunity for many businesses to reduce their tax liability and receive immediate funding for a variety of different projects. There are many different types of businesses that could be eligible for R&D tax credits, but it can be confusing when it comes to defining these opportunities and conditions that have to be met before you can make a claim.
Whether you’re thinking about hiring new employees, investing in the development of new products or even expanding your business, R&D tax credits can be a great source of funding to help with your business expenses.
What counts as R&D?
Let’s start by defining what counts as research and development.
- R&D involves the activities that a company undertakes in order to develop new products and innovate on its existing services
- R&D is generally separate from the operational activities performed by a business since it’s not immediately related to immediate profits
- R&D is carried in to help a company stay ahead of its competition and also to innovate in the industry
- R&D can be considered the first stage of a development process for a new product or service, or it can be considered a way to iterate on existing offerings
These are some general definitions of what counts as R&D. However, the official definition of R&D in the context of tax credits is as follows:
- Developing or designing new products and work processes
- Improving existing products and work processes through innovation
- Developing new prototypes or improving on existing ones
If your company carries out any of these tasks, then there’s a good chance that you’ll be accepted for an R&D tax credits application. The key takeaway here is that your company must be investing its money into a risk that may or may not pay off in terms of future profits. If you’re pouring effort, time and money into research, there’s a good chance you can claim those costs as an R&D expense.
Is my company eligible for R&D tax credits?
If your company is investing capital and taking a risk to improve, innovate or develop products, then there’s a good chance that your company is eligible for R&D tax credits. With R&D usually comes a lot of risk, so if you felt like the outcome of a project was uncertain since it utilized new ideas and concepts, then there’s a good chance that your company will be eligible for R&D tax credits.
If you can show that your recent projects were heavily related to research and development, then you can use it as the basis of your claim to begin calculating how much you could save with the help of R&D tax credits. If you can show that your project had plans to innovate and take existing technologies above and beyond, then you’ll have a solid foundation to help you make a claim for R&D tax credits.
If you’re unsure, don’t hesitate to contact us today and we’ll be happy to assist you. We can help you understand if your business is eligible for R&D tax credits and also how much you could be paid.
How many businesses claim R&D tax credits?
Almost any business that has some kind of innovation or development process will likely be claiming R&D tax credits. The definition isn’t completely set in stone; as long as your company is taking a risk by attempting to develop its products and services or innovate on existing processes, you could be eligible for R&D tax credits.
However, unless you’re knowledgeable of tax credits then you could risk underclaiming or even forgetting to claim altogether. You could be missing out on a considerable amount of money that would be helpful for everything from hiring new specialists to funding research equipment. In fact, many businesses that claim R&D tax credits don’t understand the full scope of what they can consider as an R&D expense, hence why they might be missing out on a lot of money.
So if you’re looking to get the most from your R&D tax credits, don’t hesitate to contact us today for more information. We’ll help you discover if your business is eligible for R&D tax credits and also help you calculate what you could be saving if you made a claim.
