R&D credits are a hot topic right now in the accounting world, owing to their ability to save companies thousands of pounds on their tax bills.
These credits are an HMRC incentive designed to encourage firms to invest in research and development. The idea is to help companies to plough money into activities that will grow the economy and improve all our lives.
Here are five things you must know about R&D credits.
Free Relief From HMRC
A tax credit is a powerful tool that you can use to reduce your overall tax bill. The way that it works is simple. For every £1 that you invest in research and development, HMRC will allow you to claim back an additional £1.30 off your corporation tax bill. In other words, R&D spending becomes a “super expense” increasingly your overall expenses by a further percentage, instantly making your company more profitable.
It Might Grow The Economy
Economists believe that innovation is a primary driver of economic growth. While labour and capital are important, the way that humanity organises these inputs is probably what really drives economic expansion over the long-run. Since the industrial revolution, for instance, we’ve had plenty of time to save surplus labour and invest it into capital. Eventually, you would predict that this process would reach its limit, and the economy would stop growing. But that’s not what’s happened. We’ve found transformative ways of doing things that are orders of magnitude better than previous methods. (Such as moving from the horse and cart to automobiles). R&D tax credits encourage the very human effort that led to these game-changing breakthroughs and improved life for all of us.
You Need Experts Who Fully Understand R&D Tax Credits To Make A Claim
While many accountants understand the R&D tax credit landscape, a lot do not. It’s vital, therefore, that you have professionals on your side who know what counts as qualifying research and development activities. We are among those professionals. We help you identify expenses that qualify for R&D tax credits, allowing you to save money off your tax bill and potentially, earmark more funds for R&D spending in the future.
Companies In All Industries Can Apply
R&D tax credits don’t just apply to a small number of industries in the so-called tech sector: they’re available to any company that spends money researching and developing new products. If you’re in the food business, for instance, you might be able to claw back money you invest in a new food testing lab or a new food product. Similarly, if you operate in the agriculture sector, you can claw back money for investing in the development of new farm technology.
You Can Claim Back On PAYE
Almost always, you need to pay staff to carry out research and development at your firm. Current rules, therefore, allow you to claim back on your PAYE expenses – a significant factor for any firm engaged in fruitful research and development. You can also claim back on software license or money that you spent in the last two completed financial years.
