Research & development

TAX BREAKS TO AWARD INNOVATION

One opportunity for tax relief that company owners often miss is R&D tax credits – they think that, because it is about “Research and Development”, it can only apply to work carried out in a laboratory.

In fact the scope of this government incentive is much wider: it applies to all sorts of innovations – in equipment, processes or approaches.

HOW WE’VE HELPED

We recently saved a client in the retail industry more than £30,000 in tax after they were forced to take their business online during the pandemic. It was quite a complex retail offer and so required a bespoke eCommerce website to be built which we were able to prove qualified for R&D credits.

There is no doubt that significant savings can be made, because the amount of tax credit is based not only on the sum of money invested in employing a specialist to create the new piece of machinery or system, (or, as in the case above, the software developers’ fees), but also the proportion of salary from in-house staff involved in specifying and testing the innovation.

Add these two elements together and HMRC will take that figure and allow you to claim 33p for every £1 spent as a tax credit to offset against your Corporation Tax bill. If you’ve actually made a loss because of the innovation, you may even be eligible for cash back from HMRC to reinvest in your business.

Another bonus is that these sorts of claims can be backdated for up to two years. And they are not a one-off: five years ago, we identified the potential for an R&D claim for one of our clients whose company’s activities involved importing. Our R&D specialist spent some time with the directors and key management of the company, and they made their first claim in 2011.

Since this time, the company have continued to make annual R&D claims. With the help of our specialist, they’ve identified £1.2m of R&D expenditure and have saved £326,000 in corporation tax to date.

IS THERE A CATCH?

There is no catch – but the rules are complicated, and often change, as they did following the Government’s Autumn Statement in November 2022, so that’s what we we’re here for.

The average claim is around £25,000.

To find out more and see how we can help contact Tim Lwin on 01625 416380.