Did you know that R&D tax credits give you the chance to completely transform your company? It’s a very simple process as well. You will invest in any kind of project that HMRC deem to be research or even development. This gives you the chance to claim up to 130% in additional expenses. This is on top of the standard 100% deduction. The end result? You can claim up to 230%.
If you are making a loss, then you can actually make a credit claim for up to 14.5% of the loss. The UK government have put this type of program into place so that large companies can take advantage of tax incentives and so that they can also claim cash credit. If you want to find out if you are eligible for R&D tax then the only thing that you need to do is take a look below.
About Tax Credits for R&D Projects
R&D tax credits are a government incentive. They are designed to reward any UK company who needs to claim for research and development expenditure. You will be rewarded for the investments you make and you will also be given a valuable source of cash flow, should you need to accelerate your R&D activities.
How does the tax credit claim process work?
To begin with, you will invest in a project. This project could include some scientific or technological uncertainty. The government will give you development R&D tax credits to try and help you curb the amount of risk your company is exposed to. You can then use this money to reinvest and hire new staff members. After you have done this, your company will grow, and you’ll receive even more research and development R&D credit.
What Projects are Classified as Being R&D?
HMRC will help you to determine your eligibility for R&D tax credits. It may be that you are creating a new product, service or even process. Remember that your project doesn’t need to succeed in order to qualify. In fact, it’s possible for you to get qualifying R&D expenditure credit even if the project fails. When you are putting together a claim, you need to take into account your staff salaries and the materials that they are using, whether it is heat, light or power.
You also need to include subcontractors, software and any payments you made to try and support a clinical trial. It’s even possible for you to look into an SME scheme. To qualify for this, you will need to have less than 500 staff and you’ll also need to meet certain financial requirements in terms of your turnover and gross assets. Most companies will fall into this category as the requirements are very broad.
If you are an SME then you will qualify for the SME R&D credit scheme. You might also qualify for RDEC too. If you are a large company on the other hand then you won’t qualify for the SME R&D tax credit scheme, but you will for RDEC.
If you need help filing your claim for R&D then our team can help you to find out everything you need to know while also advising you on the best way to make the most out of your application. Of course, it’s important to know that your R&D credits will be based on the amount of expenditure you have.
This is known as your R&D spend. If you want to make a calculation, then you need to identify your qualifying expenditure and you also need to use the following rates to enhance it. This will then give you an idea of what you could come out with.
Rates by Initiative
As a basic guideline, if you are a loss-making SME then you can claim up to 33% under the SME R&D scheme. You’ll get 10% from the RDEC. If you are making a profit, then you’ll claim 25% and 10% from RDEC. Lastly, large companies won’t be able to claim under the SME R&D scheme but can claim 10% from RDEC.
The Three Changes
When you look at R&D costs and credit rates corporation tax, you will soon see that there have been some changes made over the recent years. The rate of RDEC, or R&D Relief Expenditure Credit has been raised from 12% to 13%. The reinstatement of an NIC or PAYE cap is going to be delayed by a year though, and during this time, there is going to be a consultation on whether or not cloud computing is going to be eligible for inclusion.
RDEC was introduced from April 2013 and it was a replacement for the original, large company deduction relief. The rate of credit was set at 10% but then it increased to 11% in 2015. It then raised to 12% in January 2018.
The latest proposal is going to see the rate rise to 13% for any expenditure that occurs after the 1st of April, 2020. The RDEC is taxable credit “above the line”. This means that the benefit of the rate stands at 9.72% of any qualifying expenditure.
When you look at the combination of the tax rate being set at 19% and the fact that the RDEC rate is rising to 13%, you will see that the relief overall is going to rise to 10.53%. It’s vital that you understand that RDEC relief is not for large companies alone. It’s entirely possible for SMEs to claim RDEC if you meet the following categories:
· Subsidised Expenditure
· Expenditure on R&D Subcontracts
· Capped R&D Expenditure
There are so many benefits to claiming R&D tax credits. It can also change your business for the better, giving you way more access to additional resources and staff members. If you are interested in making a claim, then you can easily trust us to help you to navigate the process.
We have helped businesses to claim over £1million and we have a 100% track record. We take the jargon out of the process and we’ll even deal with all of the paperwork for you as well. This gives you more time to focus on building your business.
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