What are R&D tax credits?
The world of R&D tax credits can be a little confusing and most likely raises several questions. What exactly are R&D tax credits? Do I qualify for them? Is my company even carrying out R&D? The answer to that last one is probably yes. You might not know it, but the definition of R&D for tax purposes covers a broad range of activities, and some of your business’ activities likely qualify.
To qualify for R&D tax credits, a project must cover both of the following:
Put simply, a qualifying activity or project must develop a new process, material, device, product, or source of knowledge within a scientific or technological field. The solution must also not be straightforward or readily deducible to a competent professional within the industry. That means to say that you’ll probably have to undertake testing to achieve your desired result.
It’s important to remember that you don’t have to succeed in your activity; merely attempting to develop the advancement, successful or not, qualifies.
What is the average benefit for SMEs?
R&D tax credits are worth looking into. SMEs just like yours claimed, on average, £84,000 in R&D tax credits last year. With the possibility of claiming back such a significant amount of money, it’s no wonder that the scheme has helped many businesses make great strides in their industry that they otherwise wouldn’t have been able to.
Not only is securing the cash an important factor, doing so in a way that is robust and legitimate is essential. Many businesses fall into the trap of overclaiming, and in turn, receiving more money than they are owed. This is easily picked up by HMRC and will mean your claim enters enquiry. This is an incredibly onerous, time-intensive process that will put you under intense scrutiny from HMRC. If you are found out to have claimed too much, you will need to return the money that is owed. It might sound surprising, but some consultancies will try to claim for as much as possible while neglecting to maintain legitimacy, putting businesses at serious risk of entering enquiry.
For this reason, it’s essential to have a reputable consultancy acting on your behalf – one with experts who are familiar with your industry or sector, as well as tax. Understanding the technicalities of your projects, business, and industry, alongside the complexities of R&D tax legislation, is the only way to ensure all eligible R&D activity is correctly identified, and your claims are maximised, not least robust.
Consultancies such as Ayming hire their consultants for their technical industry and sector knowledge, as well as their tax expertise. Ayming’s team comprises scientists, engineers, software developers, technical specialists, and more.
How do I apply for R&D tax credits?
An R&D claim is submitted by inputting the qualifying expenditure into a corporation tax return (CT600) and is accompanied by a report that substantiates the claim. This report contains a breakdown of the qualifying expenditure that has been identified, explaining how it has been calculated and a summary of the qualifying activities that have been claimed for.
Consultancies such as Ayming are there to remove the complexities of the process. They work with you to prepare these reports, ensure that you are claiming for as much as possible, and open up time for you to continue innovating. Ayming is even able to complete this process in just one week with its Sprint Claims offering, a service specifically designed to help SMEs quickly navigate the complexities of making a claim.
Even with a relatively quick claims process, there is always a buffer time between submitting the claim and receiving the benefit from HMRC. At that point, all you can do is wait. In some cases, Ayming is able to trim down the entire process from first meeting, to receipt of benefit, to a single week.