There are many preconceptions businesses have that they ‘don’t do research & development’ and therefore won’t qualify for Research & Development (R&D) Tax Relief.
In this blog, Steve Govey, Head of Beavis Morgan R&D Tax Relief talks to us about what R&D entails, who qualifies and why so many businesses are missing out on this valuable tax relief opportunity.
“For businesses not yet claiming R&D Tax Relief, it often comes down to either a lack of awareness or misconceptions about who can claim. The top 5 excuses we see for not claiming money back are:
- We don’t pay tax anyway
- What we do isn’t unique
- My research project proved unworkable
- My accountant says I don’t qualify
- I don’t have the time to bother
This is leaving many businesses missing out on this valuable government incentive offering money back for expenditure on R&D.
The rules surrounding R&D tax relief are designed for all sorts of businesses. Yet, while many companies are spending large amounts of money on developing and enhancing products and innovative solutions, one of the main reasons they don’t claim R&D Tax Relief is due to a misunderstanding by them or their professional advisers as to what constitutes R&D for the purpose of tax relief. Adding to this, is the misconception that something entirely new must be developed, that failed projects cannot be included, and that loss-making companies cannot make a claim.
The government rewards businesses for exploring unchartered territories and innovating, therefore projects which fail, are not completed, or make a loss can still qualify. Many business owners are also pleasantly surprised when I explain to them the breadth and variety of activities that qualify for R&D Tax Relief.
Think about it: anything that is spent on researching or developing your current or future offerings may be liable for tax credits which means your business’ financial position could be vastly improved. Up to 25 per cent of your R&D expenditure can be claimed back under the system if your business is profitable. If you happen to be running at an operational loss for a given financial year, then up to 33 per cent is allowed under the scheme.
Some people mistakenly believe that you need an R&D department, such as one you might find in a large, multinational technology business, to take advantage of these perfectly legal tax breaks. In fact, the government offers them to all businesses because it wants companies to innovate more. In other words, the authorities want you to spend more on R&D, to get ahead and to grow your business in order to, ultimately, pay more in tax down the line as a successful, world-beating operator. Why not take advantage of this?
Eligibility is not limited to activities taking place in laboratories and science-based research centers. R&D Tax Relief can often be claimed in far broader areas and various enterprises can qualify for significant tax reductions and gain a cashflow boost. Loss making companies can even claim a refund of up to 33 per cent of tax they’ve never paid!
Running a business can be tough. There is so much to think about, you’re immersed in driving growth, and committed to achieving your targets – you don’t have the time to worry about R&D Tax Relief. But don’t fall into this trap! With expert guidance from an experienced professional, you’ll soon realise the scale of money you could be missing out on, and how little of your time it can take to access it.”
For more information relating to R&D Tax Relief, please contact Mariske Byrnes or your usual BM Connect adviser who will arrange a no-obligation consultancy call with the Beavis Morgan R&D Tax Advisory team.
