Claiming R&D tax credits
Good news for companies involved in scientific and technological research: you may be able to get tens of thousands of pounds of remuneration for your expenditure from the government.
Bad news: it’s not a simple process.
The government set up its research and development tax credits scheme back in April 2000 to support and encourage research by giving companies some of their tax back.
And it’s right that the process for claiming funding should be rigorous – it involves billions of pounds of taxpayers’ money each year. Nevertheless, this thought may be of limited comfort when you’re wrestling with your application and trying to work out what HMRC means by “enhanced expenditure” and “tax reconciliation”.
Here are some tips that might help:
Problems are good. A key thing that the government is looking for is that when you undertook your research, you took a risk – you weren’t sure if it would be successful. So every stumbling block that you hit during the process is actually good news from the point of view of your application – it shows you were doing something difficult and complicated, not something that an existing professional in the relevant field could have easily worked out.
Keep a note of all the challenges you encounter so you can talk about them in your application. These should be challenges that are part of the research itself, like unexpected results, not things like problems with logistics or suppliers that aren’t part of the scientific or technological problem you’re trying to solve.
Don’t undersell yourself. It’s a truism that those who achieve the most rarely realise the depth of their achievements – and sometimes it’s difficult to take a step back from your own work and realise how important it is. Don’t sell yourself short to HMRC. You don’t have to have reinvented the wheel; often research and development tax credits are awarded to businesses who are making important improvements to something which already exists.
It’s fine to fail. The reason this scheme exists is because the government believes companies trying to advance science and technology deserve support for their efforts – so even if your research didn’t make the breakthrough you’d hoped for, you can still be eligible for a claim. The fact that you tried is enough.
Keep records. It’s important to be able to provide accurate information: start and end dates for your research project, and accurate information on the costs involved. Timesheets, invoices, receipts, bills – these are all things you should be keeping.
Speak to an expert. Small business website Business Advice encourages companies to get help from a research and development tax specialists like R&D Tax Solutions. They are the best people to tell you if you’re likely to be eligible and will know all the costs you can claim for so you don’t miss out.
They can put your application together for you, saving you an inordinate amount of time and effort; they’ll be up to date with HMRC’s complex and ever-changing legislation and requirements; and you don’t have to worry about whether you’ve put your application together properly. Neither do you need to ditch your accountant, since most R&D tax relief specialists focus solely on R&D claims and will work alongside your regular accountant where necessary.
To learn more, why not try out this free R&D Tax Credits Calculator to see what you could be owed.