In the world of business, they say it pays to do research. However, many businesses haven’t read this memo and still think they have to pay for all the costs of research and development from their own funds. In many cases, ignorance is bliss. In this case, ignorance cuts a hole in your pocket. There’s no need to burden yourself with all the cost of r&d projects. We can help with an R&D tax credit claim which can significantly reduce your companies tax liability. The HMRC R&D tax credit scheme has been in existence for a number of years.
For a profitable SME
The government looks kindly upon a company that has shown itself to be the bee’s knees. You’re making a profit and this means, more in corporate tax intake for the nation’s coffers. But if you’re doing an r&d project to improve your products and services, good old HMRC steps in to take away some of that burden. Your enhancement rate is 130%. Your corporate tax rate is 19%. This will result in something like this.
Your r&d spending is £40,000. Multiply this by 130% and you get £52,000. Multiply this by 19% and you will get £9,880 back from the government. This is almost 25% of the overall costs for an r&d project.
For loss-making companies
The government wants to help you even if you’re not helping yourself. It’s okay, everyone stumbles a little, just don’t make a loss-making business a normal part of your life. For you, the government is willing to help you even more. You’ll do the same, multiplying your r&d costs project by 130% but you’ll add the number you get to the original. If your r&d spending was £25,000, you will need to add £25,000 to £32,500. This comes to £57,500. Next, you’ll take this number and then multiply it by the loss surrender rate which is 14.5%. You will then get £8,337 back on r&d spending of £25,000. This equates to a handsome 33% claim of your total r&d spending for the project.
You must meet the criteria
Did you really think it was that easy? Nothing involving taxes ever is. You must meet certain criteria that make your particular project eligible for r&d tax credit relief. Working with a specialist company like Veritas Noble will make you aware of what you can and can’t include. You’ll also get all the paperwork correctly the first time, so you’re not wasting time having a back and forth with HMRC who have other people doing the same as you. The form you need to fill in is CT600.
Questions to ask
When you contact someone like Veritas Noble, be sure to ask what kind of projects are eligible. You cannot include projects whereby you’re seeking to procure off-the-shelf products such as material for your own product. If you were trying to develop a material to your specifications and it was largely done in-house, this would be okay. Subtle nuances like this can so often be confused.
Tax credit relief on your r&d projects will only encourage you to do more and become better and better at making great products and services. Start learning the ropes now and take advantage of this excellent scheme.