There is no denying that the UK government wants to encourage forward-thinking businesses to grow. One of the ways that it does so is by rewarding innovation with research and development (R&D) tax credits.
The R&D tax relief scheme got launched back in 2000 and are a real incentive for firms that invest in innovation. Eligible businesses can use R&D tax credits towards the cost of developing new or modifying existing products, services, and processes.
HMRC R&D Tax Credits: In a Nutshell
R&D tax credits are, in essence, tax breaks made available by the government for qualifying companies. They enable SMEs (small and medium-sized enterprises) to claim back up to a third (33%) of all R&D activities costs, even if the project was not successful.
Large companies can also claim HMRC R&D tax credits, but they can only claim up to 10% of all R&D costs.
Qualifying companies get paid the research and development tax credits in the form of a corporation tax refund after the end of the financial year. Those companies can use that money for anything from further research and development work through to paying shareholder dividends.
Can my business qualify for R&D tax credits?
As you can imagine, HMRC has detailed criteria for companies that wish to make an R&D tax credit claim. Here are a few examples of how companies could qualify under HMRC’s criteria:
- You are operating a UK limited company;
- Your product or service achieves something that no other business (or perhaps few others) have accomplished;
- Your company has spent at least £100k on qualified research activities, including hiring qualified experts, paying for materials, technology, and so on;
- Your company paid for its R&D expenditure within the past two to three financial years.
If you’re unsure whether your business meets all of the criteria set out above, it’s worth contacting Veritas Noble on 01327 317561 to discuss this in more detail.
How much money could my business receive?
Each company will have differing qualified research expenses for their business innovations. As such, it’s impossible to give an exact amount.
In general, SMEs can typically receive around 25% of their R&D costs refunded through their corporation tax return. If your business ended up making a loss, it’s possible to receive up to 33% of those costs back.
However, if your company is only breaking even, you could potentially only receive up to 15% of your R&D costs back.
In case you wondered, an SME gets defined as a company with 500 or fewer employees, has a turnover of less than £100 million, or no more than £86 million gross assets.
Do you run a large company? If so, you can typically expect to receive 10% of your R&D costs refunded through your corporation tax return.
It’s important to note that HMRC defines a large company as one with more than 501 employees, and either a turnover of £100 million or more or a balance sheet above £86 million.
How can my company apply for HMRC R&D tax credits?
As with many processes related to HMRC, applying for (and qualifying for) R&D tax credits can be lengthy and drawn-out. Most firms find it easier to use specialists like Veritas Noble, as they are knowledgeable and skilled in HMRC’s complex rules and guidelines.
The process for making an R&D tax credit claim gets defined in the following three stages:
- Produce a convincing and compelling claim;
- Curate a clear and concise table of financial calculations;
- Alter the CT600 (corporation tax return) and file the R&D tax credit claim with HMRC.
What happens once the R&D tax credit UK claim gets filed?
Once the claim gets submitted to HMRC, it then becomes a case of waiting patiently for the outcome. Assuming all the required tax credit documentation got submitted along with the claim, you should hear back from HMRC between three to eight weeks after submission.
When HMRC has given the green light for your qualifying R&D claim to go ahead, it shouldn’t take long for your company to receive the money.
There will be times where HMRC may have further enquiries to make before they can approve your development R&D tax credit UK claim. In those cases, HMRC will write to you and usually ask if they could meet at your premises to discuss your claim in further detail.
Why shouldn’t I submit my firm’s claim myself?
You may have decided that submitting an R&D tax credit claim is something you could do yourself. It might be a decision you thought would be good if you take an active rule in managing your company’s finances or research and development.
If you’ve got suitable previous experience of submitting such claims with HMRC, then yes it’s something you could feasibly do yourself. But for most business leaders, it makes more sense to let a company such as Veritas Noble take care of the claim for you.
Why does it make sense for a third-party firm to handle such a claim on your behalf? Here are a few examples:
- Companies such as Veritas Noble are qualified experts at navigating HMRC’s complex rules and regulations;
- They have previous experience of submitting R&D tax credit claims, and know what it is HMRC want to see in each claim;
- You significantly reduce the likelihood of HMRC requesting further information to support your claim.
Why does it make sense to work with Veritas Noble?
Veritas Noble comprises leading tax consultants that specialise in many industry sectors such as waste, recycling, and machine manufacturing.
Our aim is to help companies like yours save money through the many government grants and schemes open to SMEs and large businesses.
At Veritas Noble, our friendly team of expert tax consultants understands businesses like yours, and our goal is to help your company grow and prosper.
To find out more about how we can help your company with its R&D tax credit claim, contact us today on 01327 317561 or email info@veritasnoble.co.uk.
