Do you do research or scientific development for your business? Have you thought about claiming R&D credits?
Many business owners are unaware that they can claim R&D tax credits for their business or believe that the process of claiming the credit is too complicated and costly to go through with.
HMRC have recently changes the application of R&D tax credits which means that for the first three periods of claiming R&D tax credits your claim will be allowed without further enquiries. This makes the process much quicker and straight forward for businesses.
What are R&D tax credits?
If your business incurs costs (either on its own behalf or for its client’s behalf) for developing new products, processes or services then you can receive either a cash payment or a tax deduction for those costs.
From April 2015 the tax relief allowable on research and development costs is 230%. This means that if you spend £100 on research then you reduce your corporation tax by an additional £130 on top of the £100 cost.
You can choose to receive the amount as a deduction from your corporation tax bill or as a tax credit which is paid back to the company in cash.
How are R&D tax credits claimed?
R&D tax credits are claimed via the corporation tax return. Previously HMRC strongly encouraged companies to provide a summary of the costs incurred for R&D and send it to them alongside the corporation tax return.
This is because failure to do so could potentially mean that HMRC would enquire into the costs for R&D in order to check that they were allowable costs.
What’s changing?
Well essentially it is becoming much easier (and less scary!) to apply for R&D tax credits. Basically if you think that your company qualified for tax credits and you have never claimed before then you can apply for advanced assurance.
If you apply for advanced assurance this means that for the first 3 accounting periods where you claim the relief, your claim will be approved by HMRC without the stress of any enquiries.
Benefits of advanced assurance
After you have applied for advanced assurance you will be assigned a specialist at HMRC to help you understand and comply with the conditions. This means that HMRC are pre-checking that your business and costs qualify for the relief.
Once approved you have proof that you will receive the relief and can use this knowledge to either apply for funding and grants or plan business strategy.
How do you apply?
If you think your business may be eligible for R&D tax credits and you want advanced assurance then you can either use an accountant to apply for you or you can do it yourself.
If you wish to do it yourself then start here.