Investing in the future of your business is expensive so you want to make sure that you’re spending your money wisely. While R&D tax relief has been in the UK tax legislation for over 18 years, there are still a number of misconceptions regarding the process. But in this day and age of information, there really needn’t be. R&D tax claims are filed by companies across the UK to the tax man. Business owners don’t always realise that this is administered by the HMRC on behalf of the government.
With this in mind. We’ll take a look at the common misconceptions surrounding R&D tax credit claims. Some of these you might have heard of before. These misconceptions are stopping UK companies get their hands on tens of thousands of pounds of cash earmarked just or them. Let’s take a look at them and why they matter to your business.
#10 R&D Misconception: It’s Only for Big Business
We have heard this one a few times. There are actually two different schemes for R&D credits
- Research and Development Expenditure Credit
- Small and medium sized enterprises (SME) R&D Relief
The first one is for large companies. The second is for smaller businesses. This is the one that actually attracts the most claims. This is simply because there are far more SME’s out there. If you are a small business, then you aren’t excluded from making an R&D tax credit claim.
Research suggests that there are around 5 million SME’s in the UK. You are in company! There are so many reasons that an SME might make a claim for R&D tax credits. Don’t let the fact that you are not one of the big boys put you off.
#9 R&D Misconception: It’s Only for Science
Another common misconception. We speak to businesses all the time that don’t see what they do as true research and development. The UK government has their definition of R&D. It matters because this is where they are looking to incentivise businesses. It goes like this –
“The work that qualifies for R&D relief must be part of a specific project to make an advance in science or technology.”
Now we can see from this why it might be confusing. But under the headlines, there is a level of detail. We have helped businesses from sports to manufacturing, from food & drink to software. You might not see what you do on a daily basis as strictly an advance in science or technology, but there is a good chance an R&D tax claim sits in your business. Drop us a line to discuss. You might be pleasantly surprised.
#8 R&D Misconception: It’s Hard Work
Putting in an R&D tax claim does take a bit of time and effort. There are forms to complete, figures to work out and explanations to deliver. If you have ever dealt with the tax man, then the thought of starting another negotiation with them might not fill you with joy.
But that’s where someone like LUMO can step in and help. If you are busy with your business, then we can take the strain. Let us submit the R&D tax claim for you. It starts with a quick chat. From there we can promptly let you know if you have a potential claim. Then we’ll do all the legwork. It’s as simple as that.
#7 R&D Misconception: It Isn’t Worth It
There are some people we have spoken to that think the money coming back from an R&D tax claim can only be small. After all, if you don’t think you spend a lot on research and development then how can you get a lot back? But you can claim back an additional 130% of qualifying costs to make an overall deduction of 230% of the money you spend. This includes costs such as –
- All related employee costs such as salary as well as National Insurance and pension contributions
- The cost of any materials used for the project, such as prototypes or discarded attempts
- Money spent on outside expertise such as contractors or reports
And there may be more too. The key to an R&D tax claim is maximising the submission.
#6 R&D Misconception: I Can’t Claim Because My Project Failed
We’re not quite sure how this one got through the net! Even if your project wasn’t successful, there is every reason why you can make a claim for R&D tax credits. The UK government’s idea behind tax credits is that they reward those who take a commercial risk. Their definition goes like this –
“You should be researching or developing something that isn’t known to be feasible when you make or discover it.”
As this is the case, it would be really difficult for them to exclude claims where the project didn’t come to a successful conclusion. If you have had a project in the last few years then we need to speak, whether that was successful or not.
#5 R&D Misconception: I Don’t Make Things
When you look at R&D tax credits, it can be easy to get into the thinking that they only relate to businesses that actually make something. While it is true that manufacturing businesses can make sizeable R&D tax claims, these are ideal for other businesses too. The manufacturing sector in the UK is primed for Brexit and all the potential risks involved.
But other industries across the nation are also eligible for R&D tax credits as they apply to changes in processes or procedures as well as manufacturing a new product. If you have changed the way you work in any way shape or form over the last few years, then it is well worth your while exploring R&D tax credits and if they apply to you – whether you make something or not.
#4 R&D Misconception: It Takes A Long Time to Deal with The Tax Man
This is often the case. Submitting things through to the HMRC and waiting for a response can take an age. Contrast that with the short periods of time they expect you to take when answering their queries. But R&D tax credits don’t take long at all to come through.
In fact, we have experienced many claims coming back within 4 to 6 weeks. All you nee to make this happen is to submit your report correctly. There are a few points that you must cover, but once you have these, the money should be sitting back in your business in no time at all. On this occasion, dealing with the tax man is a breeze.
#3 R&D Misconception: You Need to Be A Tax Expert
As with all things in business, there are certain areas where you might want to explore but don’t feel you have the expertise. R&D tax credits are one of these. You might have heard rumours about them, but not enough to stop what you are doing and learn all you need to know.
Becoming an expert in tax alongside all of the other things you need to run a successful business is a daunting prospect. But., luckily you don’t have to do this. If you work with a company like LUMO then we make it as easy as possible for you. We’re the tax experts so you don’t have to be.
#2 R&D Misconception: There Is A High Chance of Failure
If you are putting a great deal of time and effort into something, then you want a return for this investment. It is a common R&D misconception that many claims fail – as in they are rejected by the HMRC.
Although it’s true that nobody can absolutely guarantee that you have a valid claim, we like to think that we get pretty close. There are two reasons for this –
- We have a 100% success rate with the HMRC for R&D tax claims
- We don’t charge a penny until the claim is successful and the money in your business
If you work with us, we will be straight from the outset. If we think you have a claim then there is a very, very good chance that you do.
#1 R&D Misconception: Things Like This Don’t Happen to People Like Me
Reading this article and hearing success stories with the might get you thinking that all of this happens to other people and not to you. There are always fortunate people who submit something in blind hope and get lucky.
But that’s not the case with R&D tax credits. If you know what you are doing, then success is just around the corner. We partner with companies and help them make R&D an integral part of their business. This means they can claim R&D tax credits year after year.
Get in touch if you want to find out more about R&D tax credits and how they can work for you. There are far too many misconceptions out there. Speak to an expert and find out the real deal.