R&D tax credits feel like they are an elusive spirit that nobody can seem to pin down and question fully. If you ate a small business owner, then I’m sure you have heard reference to R&D tax credits but might not know a lot of detail about it. That’s nothing to worry about. There’s enough to concern a small business owner anyway.
Dedicate a few minutes to this article and you’ll know all you need to know about R&D tax and what it can mean to your small business.
What is R&D and do I carry it out?
Great question. R&D stands for Research and Development – we’re sure you already knew that part. But people carry their own definition of R&D around with them. Some think it only applies to manufacturing companies. Other see it as people in lab coats experimenting with new and innovative products. Both of these are eligible R&D tax claims but there is so much more to R&D in addition.
The truth is that R&D, as classed by the HMRC can include
- Making changes to an existing product
- Coming up with something new
- Embedding new equipment
- Researching new processes
- Implementing new procedures
There are so many different projects that your business could have been carrying out that are classified as R&D, according to the tax man. But why is this important? Well, that’s where it gets really interesting…
R&D Tax Credits
The R&D tax credit is at the centre of much of the debate surrounding Research and Development. If you want to know precise detail, then head on over to the HMRC website. But if you want to know the headlines, they stay here –
- R&D tax claims can be worth over £35,000 to your business
- Claims can come back in as little as 6 to 8 weeks
- All it takes is a simple form on the HMRC website
- The money comes back in either a reduction of your Corporation Tax bill or cash
- You can use the money for anything you like (as long as it’s legal!)
If you are a business that has carried out any projects over the last 3 years, then you should look into R&D tax credits as a matter of some urgency. They can transform your business by securing a capital lump sum back from the HMRC – how often does that happen?
R&D Tax Relief as An Alternative to Small Business Loans
Finance is a major concern for the small business owner and many turn to the small business loan in order to fuel their growth plans or sustain them through hard times. But it doesn’t have to be this way. R&D tax relief is set up to reward companies that take a commercial risk in doing something new. If this is you then you can make an application and gain access to funds quickly. From there you can use the money to expand, pay your team a bonus or take it from the business.
Whatever you do, make sure you take advice from your accountant and business adviser to make the most efficient use of this vital cash injection.
Research and Development
The words ‘Research and Development’ don’t always mean what you think they mean. In terms of gaining access to R&D relief, it isn’t the definition that you or I use that is important. It’s actually what the government think. And that definition determines whether you can access funds from the HMRC in the form of R&D tax relief. This isn’t a one-off thing – R&D tax relief has been funded to 2021 with no signs of this support being withdrawn as Brexit looms.
The last few minutes might well have sparked your interest. R&D tax relief is heavily under claimed and there is so much to do to inform people of the ins and outs of R&D tax relief.
If you do anything that might vaguely look and feel like R&D, then it’s worth your time investigating a little further. I’m sure this article has given you a lot to think about. If you want to know more then you can’t go far wrong with having a chat with the friendly team.