No greater words sum up the HMRC R&D credit scheme than these: ‘research equals reward’. But what exactly does the UK’s tax authority mean when it says this?
How does “Research Equals Reward” work?
Research and development is vital to the modern world. Humanity, in general, (and countries, in particular) need innovative firms to come up with new products, technologies, and services that solve the problems we face. The world needs private enterprises to develop new medical technologies that can reduce the burden of an ageing population, new green solutions that solve environmental crises, and new economic opportunities that reduce deprivation. Innovation is the only way forward on many of these fronts.
The UK government understands this. It wants a more productive, healthier, vibrant society, and it sees innovation in private enterprise as a way to achieve this.
The problem is how to do it. How do you get companies to invest more of their precious resources into R&D to telescope the future and bring it more towards the present? The answer, according to HMRC is R&D tax credits: a special form of tax relief that incentivises companies to invest resources into research and development, fuelling the solutions that will help make the UK a better place to live and work in the future.
R&D tax credits can reorientate your firm for success
We should note that R&D tax credits aren’t just a way to save on your corporation tax bill: they’re actually a driver of competitiveness; something you can use to reorientate your firm for success.
The meaning of HMRC’s slogan “research equals rewards” is real. Investing in staff to research helps the business in many ways, not least as a qualifying activity to maintain relief from HMRC.
Don’t underestimate the value of creating an innovation-led company; this is a real differentiator and creates stability and competitive advantage over your competitors. By continually innovating, your company creates the seeds of future success, setting it aside from the competitors in your space and enabling you to deliver market-leading products and services at a lower cost.
For every pound you spend on research and development, you can reduce your tax bill by an additional £1.30 on top of the original £1 expense
R&D tax credits are a tool that you can use to achieve a culture of innovation at your firm that continually pushes the envelope. These tax credits allow you to claim back a further percentage off your expenses, in addition to your regular tax bill deductions. For every pound you spend on research and development, you can reduce your tax bill by an additional £1.30 on top of the original £1 expense.
It should hopefully be becoming clear what HMRC means by “research equals reward.” Not only does innovation lead to long-term rewards at your firm by allowing you to become more competitive than your rivals, but it also produces immediate accounting benefits. What’s more, these accounting benefits let you plough even more money into R&D efforts today by increasing the overall profitability of your firm.
Remember, these tax credits don’t just apply to the “technology” or pharmaceutical industries, but across the board. What constitutes R&D spending is very broad, so you may already qualify. Check with us today to find out more.