Business Tips Archives | R & D Tax Credits

Does Size Really Matter?

Business Tips, R & D Tax Credit, Uncategorized

When it comes to R&D tax claims, being aware of the size category your company falls under is vitally important.

Many UK companies may want to appear bigger than they are, in the hope it attracts more business. However, when it comes to R&D tax claims, it is quite the opposite.

Your company size can greatly affect the amount you can claim via R&D tax credits. It can be quite complicated too, if you do not know what to look out for, and HMRC can potentially penalise you if you get it wrong on the application.

To ensure this doesn’t happen, our experts have outlined a few key factors in relation to company size to think about when applying for R&D tax credits.

What are the two types of R&D tax available?

Before delving into detail about what HMRC looks for when assessing the size of a company, it is worth noting why size matters.

There are two categories of R&D tax credits available. The Small and Medium Enterprise (SME) relief, and the large company relief, also known as the Research and Development Expenditure Credit (RDEC). Let’s look at the SME relief first.

SME Relief

This is the more generous of the two categories. R&D tax credits are calculated based on the company’s research and development spend. To make an R&D credit calculation, you need to identify qualifying expenditure and enhance it by the relevant rate.

The SME R&D tax relief allows companies who qualify to:

deduct an extra 130% of their qualifying expenditure from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction
claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss

As of January 2019, SMEs are able to claim up to 33p for every £1 spent on qualifying R&D activities. This is potentially a huge amount for many SMEs, highlighted by the fact that the average SME tax credit claim is approximately £62,000. This is not an amount to be ignored in today’s current financial climate.

Large Company Relief – RDEC

If you are large company, the relief is a little less generous. The RDEC rate is 12%, however, because the RDEC rate is paid net of Corporation Tax, the effective rate your large company can receive is worth 10p for every £1 spent.

Similar to the SME relief, the credit is offset against the company’s tax liability or, in some circumstances, is payable in cash.

According to the latest Government statistics, the average value of large company R&D tax credit claim was approximately £343,000.

To sum up the two categories, we have noted down the figures in a table below.

What is the definition of an SME in relation to R&D tax?

The Government has set clear guidelines in relation to which companies qualify for which category. However, these guidelines can become confusing if all factors are not considered.

HMRC define a large company as either having:

More than 500 employees
An annual turnover of €100 million or;
A balance sheet total under €86m

There are a few factors to bear in mind here, however. The 500 employees, for example, are classed as FTE (full-time equivalent). This means that there are two types of employees that do not contribute to the total count:

Employees on maternity or paternity leave
Apprentices

With the increase of apprenticeships over the last 15 years, it is worth noting this down as they could make up a significant part of your workforce, and this could have an impact on the amount of R&D tax relief you can claim.

How do linked companies interact with R&D tax?

In addition to keeping an eye for the count of employees, it is also vitally important companies keep in mind any linked or partner companies. If your company has external investors, or is in a group, it is worth checking with an R&D tax expert whether it could affect your SME status.

If, for example, your company has more than 50% of the shareholders’ or members’ voting rights in another company, the data of that company needs to be added to the data from the company putting in the R&D tax claim.

In addition to this, if 25% of the company is owned by another entity, or if the company in question owns 25% of another, it is classed as a partner company which can also complicate matters.

We often see SMEs fall foul of this particular aspect of R&D tax credits. If you are unsure about your status, our advice would be to double check with an expert before putting in a claim.

Is my company qualifying for R&D tax credits?

Once you’ve worked out which category you fall under, you will need to investigate if the work you are doing actually falls under the required qualifying activity criteria.

The government has set out some guidelines to help companies. These are:

Qualifying Activity:

Creating new products, processes or services.
Changing or modifying an existing product, process or service.
Activities aimed at obtaining new knowledge.
The search for alternatives for materials, devices, products, processes, systems or services.

If your business is undertaking R&D activity in relation to a specific project (even if the project is unsuccessful in the end) and the R&D activity meets the above definition of qualifying R&D, then you could be eligible for this additional tax relief.

We often come across many companies who carry out eligible R&D activities without realising that their work qualifies for this little known tax relief.

How can RDTaxCredit.org.uk help?

RDTaxCredit.org.uk understand that the process of claiming R&D tax credits can be a little complicated. That’s why we have industry experts who can guide you through the process, step-by-step, to ensure that you can claim as much tax relief as you possibly can.

We can determine whether you are an SME or large company under the government’s rules, and ensure that there are no problems or mistakes with the application.

Our experts help companies across all sectors with claiming R&D relief, leaving them with more cash to re-invest into their business. We have of experience in dealing with many SMEs and large companies across the UK.

We handle the R&D claim from start to finish and can produce the technical report on your behalf that helps R&D Tax inspectors understand your work and approve the claim more efficiently.

We offer a friendly and professional approach to R&D tax credits which includes:

A free no obligation initial review.
100% success rate
30 day quick turnaround

If you would like to contact one of our experts for free initial advice, complete the quick enquiry form to receive a no-obligation review of your R&D Tax Relief claim.

March 23, 2019/0 Comments/by Samantha Holloway

Six Reasons Your Investors Will Love R&D Tax Credits

Business Tips, R & D Tax Credit

Whether you are looking for start-up funding or entering the latest round to expand your growing business, investors will look favourably at R&D tax credits.

As an SME, investment can sometimes be hard to come by, with many competitors chasing the same investors. This is why, when it comes to securing investment, any advantage you can have over your competitors is vitally important.

In this brief guide, we will explain exactly why investors love R&D tax credits, and why your company needs to consider the lesser known tax relief.

However, to fully understand why investors will appreciate R&D tax credits, first we need to understand exactly what they are.

What are R&D Tax Credits?

R&D (or research and development) tax credits are a government incentive which rewards companies for spending money on innovation and research within the UK. The UK Government is aware that Britain is world-renowned force in the research and development arena, but innovation is not cheap, so in 2000 they introduced the R&D tax credit.

The credits work as a tax relief, reducing a company’s tax bill by a certain percentage of qualifying R&D expenditure, or by a payment in cash, again linked to qualifying R&D spend.

These tax credits can help companies of various sizes across different industries take on new innovations and projects that can get new products onto the market, or re-invent existing products to make them more efficient.

The relief is not to be sniffed at either, with a staggering £21.4bn being claimed since 2000, in the form of 240,000 claims. Reports suggest that the average claim for UK SMEs for R&D tax relief is around £43,000 – £62,000.

So, now we know a little bit about what R&D tax credits are, how exactly are they beneficial to your company’s investors?

R&D tax credits help cash flow

This is a fairly obvious point, but if your company’s tax bill is reduced or your company receives a lump sum in cash, it has a clear cash benefit. As any SME owner knows, cash is king, and in a brand new company cash flow can be crucial to its success (or failure).

This extra cash can be invested in a number of areas across your company, such as staff, technology, machinery, and further training. This can create more efficiency across the business and, in turn, can bring more profits further down the line – something any investor would be pleased to hear.

R&D tax credits are quick

Trying to secure funding can be a lengthy, drawn-out process. Whether through the traditional routes, or through kickstarting campaigns, it can take months for funding to actually come to fruition, during which time your company still has to carry out business as usual.

In contrast to this, R&D tax credits can be in your company’s bank much quicker. The average length, from start to finish, for a R&D tax claim is 4-6 weeks with our advisers, and then a further 4-6 weeks with HMRC once it has been accepted. This means you could have cash in your bank within two months of first getting in touch.

Investors will see money on your bottom line, and your company will be in a position of strength compared to many of your competitors.

R&D tax credits can extend the timeframe for funding

The cash benefits of R&D tax credits can stand you in good stead in relation to other types of funding and investment. It can allow companies to be clever about whether they delay a certain round of funding because it would be more advantageous at a later date. They also put companies in a stronger position during the various rounds of funding.

Many companies have time-bound factors when thinking about funding. For example, there often has to be at least a gap of 12 months between funding rounds. R&D tax credits allow companies to not be as desperate as they may have been without the extra cash flow.

R&D tax credits position you as a company investing in innovation

Investors want to be involved in a company that invests in the future of its industry. They also want to see progress within a company.

When you receive R&D tax credits, you are proving to them that your company is putting time and money aside to develop a certain area of the business, ensuring that you are one step ahead of your competitors. Investing in research and development can show onlookers that you are staying ahead of the curve.

This is invaluable to investors, knowing that they have invested in a company that can give them a return not just this year, but for many years to come.

R&D tax credits show you have a firm grasp of your own accounts

It’s safe to say that R&D tax credits are not the most well-known tax relief out there. This is partly due to how complex the application process can be, often putting companies off the process who do not seek professional advice.

By going through the application process, however, you can show investors that you have a firm grasp of your company finances and accounts. This is due to having to show HMRC all of the qualifying spend in relation to research and development, which could include staff wages, training investments, third-party contractor costs, IT investment and more.

Knowing exactly what you are and what you are not entitled, and having all of the accounts written down for HMRC, puts companies in good stead when investors come to look at the finer details of the company’s bottom line.

How can rdtaxcredit.org.uk help?

At rdtaxcredit.org.uk, we understand that beginning to think about claiming R&D Tax Credits may be a little daunting. We want to help you through the process, to ensure you receive the financial reward that the Government wants to give you. Especially in this current climate where every penny counts.

Our expert team of accountants are committed to working with you and your company to provide strategic R&D tax credit advice. We can review your claim and propose new techniques to ensure you claim the maximum amount you are entitled to.

We offer a friendly and professional approach to R&D Tax Credits which includes:

A free no obligation initial review.
100% success rate
30 day quick turnaround

We also provide extensive information on our website should you wish to research R&D Tax Credits in further detail. We have information relating to individual industries such as:

Audio and Visual
Building Technologies
Commercial Printing
Creative Digital and Media
Food and Beverage
Health
Manufacturing and Engineering
Marine
Motor Racing
Pharmaceutical
Software Development
Technology
Telecoms
Web Development

If you would like to contact one of our experts for free initial advice, complete the quick enquiry form to receive a no-obligation review of your R&D Tax Relief claim.

March 21, 2019/0 Comments/by Samantha Holloway

Seven Tax Breaks Every Business Owner should Know

Business Tips, R & D Tax Credit

Running a business can be challenging at the best of times, so make a note of these helpful tax incentives to ease a bit of pressure on cashflow.

Business owners up and down the country are constantly looking for ways to save money. Whether it is saving on operating costs, having more efficient business practices, or simply increasing profit margins.

Improving a company’s tax efficiency is often something that is on the to-do list of many company directors, but with so many day-to-day tasks in a workplace, it is fair to say sometimes it gets put off. That is why we are giving you a handy guide to help you understand what tax incentives are out there for your business.

If you are not aware of these seven tax breaks, you are essentially missing out on money that is rightfully yours. Below, we will go through all the different tax incentives and reliefs.

Value Added Tax

Value added tax (VAT) is a tax that is imposed by the government on the sales of goods and services. Businesses with an annual turnover of more than the current VAT threshold – £85,000 – must register for VAT and complete a quarterly VAT return.

After signing up to VAT, you are legally required to charge an extra rate of cost on any goods or services you sell. These rates are:

Standard rate – 20%
Reduced rate – 5%
Zero rate – 0%

The most common form of VAT is the standard rate, set at 20%. The benefit then comes from the fact your company can reclaim VAT when completing a tax return. VAT-registered companies can claim back output tax on goods or services bought through their company. They can also claim back input tax where they have been charged VAT by another company.

Any VAT claim can be backdated by up to four years, allowing companies to receive a lump sum in cash, helping cash flow.

It is also a misconception that small businesses below the £85,000 threshold cannot register for VAT. Any business below the threshold can voluntarily register for the tax.

EIS & SEIS

The EIS (Enterprise Investment Scheme) is aimed at smaller, higher-risk businesses who raise finances by offering tax relief on any new shares. It is a very tax efficient way of investors investing into small companies.

People can invest up to £1,000,000 in any tax year and receive up to 30% tax relief, encouraging investment in small companies.

The SEIS (Seed Enterprise Investment Scheme) is even more generous, and aims to help companies at the very early stages of their lifecycle. Investors, including directors, can receive a tax relief of up to 50% on investments up to £100,000.

Clearly, these two schemes can be vital for small business who are thinking about securing investment.

Enhanced Capital Allowance (ECA)

This tax relief is designed to allow businesses to be more efficient in relation to energy waste, and in turn, help the company become greener. The ECA focusses on improved technology, allowing companies to buy products on the Energy Technology List (ETL) for free, by deducting costs against any taxable profits.

These products include air to air energy recovery, heating, ventilation and air conditioning (HVAC) equipment, solar thermal systems and waste heat to electricity conversion equipment.

The equipment must be bought, not leased, and the relief does not apply to buildings or land.

You can see the full Energy Technology List here.

Travel Expenses

Company owners and employees are both eligible to claim tax back on costs relating to business travel. The travel has to be related to outside of a normal working commute.

You can claim tax relief for money you have spent on things like:

public transport costs
hotel accommodation if you have to stay overnight
food and drink
congestion charges and tolls
parking fees
business phone calls and printing costs

HMRC state that the deductions can only be claimed on an expense that is deemed necessary to the travel, and may ask you to prove the travel in the form of receipts etc.

It is a small yet handy way to save some money, particularly if your business involves extended travelling.

Uniform Tax relief

Many company owners do not realise that they can claim tax deductions when investing in uniforms for the business. Company owners must keep a record of uniform purchases, and the uniform must have a permanent logo of the company on the clothes.

Employees can also claim a tax rebate for the cost of maintaining and replacing their uniform.

Business owners can find out how much they might be owed by using this online calculate – here.

Christmas party relief

The annual staff party can often be relatively expensive for business owners, but it is something which can bring staff together and increase morale. It may come as a surprise to many owners that any limited company can claim back tax relief on the cost of hosting office parties, making the celebration more affordable.

If your party follows the below criteria then you could be entitled to a tax-free subsidy for food, drink, travel or accommodation:

The total cost doesn’t exceed £150 per head inclusive of VAT
The event is primarily for entertaining staff, and
All employees are invited

This is often a nice surprise for many business owners, as it softens the blow at the end of the year.

Research & Development tax credits (R&D tax credits)

R&D tax credits, or research and development tax credits, were created in 2000 by the UK government to help small and medium enterprises (SMEs) invest in innovation. Any company developing new technology can legally apply for R&D tax credits, with the credits working as a tax relief – reducing a company’s tax bill by a certain percentage of qualifying R&D expenditure, or by a payment in cash.

Since the tax relief was introduced in 2000, an incredible £21.4bn has been claimed by UK businesses. On average, an SME’s claim is equal to almost £54,000.

The research and development being completed by the company has to be focussed on advancing industry level knowledge. If the research could be carried out by a reasonably competent professional in that particular field, you may have trouble convincing HMRC of the validity of the claim.

Many SME owners simply think it is too good to be true, and there must be a catch. This is leading to many company owners missing out on this legitimate financial reward for their valuable investment within their industry.

How RDTaxCredit.org.uk can we help

We offer a friendly and professional approach to R&D Tax Credits which includes:

A free no obligation initial review.
100% success rate
30 day quick turnaround

If you would like to contact one of our experts for free initial advice, complete the quick enquiry form to receive a no-obligation review of your R&D Tax Relief claim.

March 19, 2019/0 Comments/by Samantha Holloway

Five Tips for Businesses in 2019

Business Tips, News, R & D Tax Credit

Five tips for businesses in 2019

Make sure your business gets off to the best possible start this year by following these key tips.

Getting your business off to a great start this year requires extensive planning, dedication to put the time and effort in, and a positive outlook for the year ahead. Here, we provide you and your business with five key tips to help you along the way.

Map out your business goals

Any successful business year starts with clear, well-defined goals. Focusing on what you want to achieve, documenting it and then setting up an annual, quarterly and monthly plan to achieve those goals is a great way to get your year started.

Throughout the year, the stresses of the day-to-day often get in the way of being able to see the bigger picture. If you have thorough goals, it can remind you and your staff exactly what you are all aiming for. This then starts to feed into your business values and mission statement.

Begin your plan with a SWOT exercise. This useful analysis helps you identify areas your company succeeds in, and areas it could do better in. The acronym stands for Strengths,Weaknesses, Opportunities and Threats. Going into detail in relation to these four areas is a great way to see where you company stands going into the long year ahead.

After this, ensure your goals are SMART. This means your goals are:

S– specific
M– measurable
A– achievable
R– relevant
T– time-bound

Having SMART goals ensures that the goals are not too vague and your company is able to quickly identify any missed targets. In addition to this, progress is easier to monitor.

Be adaptable

If 2018 taught business owners anything, it was the need to be adaptable. The ever-changing business and political landscape means that business owners are having to use ingenuity to continue to succeed.

2019 will be no different. A good business in the current climate is a business that can change and conform to the latest standards on a nearly real-time basis. This calls for an increased emphasis on developing an understanding of the idea of flexibility and adaptability, in all parts of your business – from HR, marketing and IT, to the board room.

We are seeing leaders in the business community succeeding through their ability to:

Think creatively
Quickly be able to shift focus
Embrace change
Exercise emotional intelligence

The ability to adapt in certain commercial situations determines your level of flexibility — and possibly the heights you are able to achieve in the forthcoming year. If you have the ability to adapt in your industry, you may already be one up on your competitors.

Embrace Video Content

It’s safe to say that business leaders are touting 2019 as the year of the video. In a recent survey across multiple sectors, a question was put to clients:

Where both text and video are available on the same web page, how would you prefer to learn about a product or service?

The answer?

80% video, 20% text

Video has, of course, been a vital weapon in any company’s marketing arsenal for a while now, but 2019 is shaping up to be a video takeover. According to Cisco’s Visual Networking Index, global consumer internet video traffic will account for 80 percent of all consumer internet traffic this year.

There are also now ways for businesses to embrace video without necessarily hiring costly videographers. Mobile phones are now at the cutting edge of high definition cameras, and platforms like Facebook, Instagram and YouTube mean that consumers are more used to seeing footage that is not necessarily studio quality.

Some videos trends to look out for this year are:

An explosion of video on website
Video in email
Live video on social platforms
Native video (direct to Facebook/YouTube)
360-degree videos

Ensure you are catering to the 80% that said they would prefer video over this coming year.

Health and Wellbeing in the workplace

Another area that is set to grow further in 2019 is health and wellbeing. 2018 saw the wellness world expand. People started having more open and honest conversations about mental health, working conditions, inequality and workplace biases.

For your company to succeed in an environment where both workers and consumers are becoming more self-aware around wellbeing issues, business owners have to being thinking about their own business values, and possibly reassess how they carry out their day-to-day work.

Apple recently announced its “best of 2018” and listed self-care as the trend of the year. We believe this trend will continue into 2019, as more people realise that self-care is now essential, not an indulgence. And one dimension of self-care that has definitely been on the rise in the workplace is mindfulness practices. It’s being offered at some of the world’s biggest companies to cut workplace stress and boost productivity.

Ensure you keep a keen eye on both your staff’s, but also your own, mental wellbeing. A healthy business owner breeds a healthy business.

Apply for R&D Tax Credits

Our fifth and final tip for your business in 2019 is one that we have been shouting from the rooftops for a while. In the uncertainty of the following year it is now more important than ever for companies to be prudent with their tax relief efforts. Particularly when it comes to tax relief as a government incentive.

R&D tax credits, or research and development tax credits, were created in 2000 by the UK government to help small and medium enterprises (SMEs) invest in innovation. This is due to the UK government wanting businesses to flourish and compete on a global scale.

The relief works by either reducing a company’s liability to corporation tax or by making a direct payment to the company.

The research and development has to be focussed on advancing industry level knowledge. If the research could be carried out by a reasonably competent professional in that particular field, you may have trouble convincing HMRC of the validity of the claim.

Since the tax relief was introduced in 2000, an incredible £21.4bn has been claimed by UK businesses. On average, an SME’s claim is equal to almost £54,000 – not a sum to be sniffed at.

How can rdtaxcredit.org.uk help?

At rdtaxcredit.org.uk, we understand that beginning to think about claiming R&D Tax Credits may be a little daunting. We want to help you through the process, to ensure you receive the financial reward that the government wants to give you. Especially in this current climate where every penny counts.

We offer a friendly and professional approach to R&D Tax Credits which includes:

A free no obligation initial review.
100% success rate
30 day quick turnaround

We also provide extensive information on our website should you wish to research R&D Tax Credits in further detail. We have information relating to individual industries such as:

Audio and Visual
Building Technologies
Commercial Printing
Creative Digital and Media
Food and Beverage
Health
Manufacturing and Engineering
Marine
Motor Racing
Pharmaceutical
Software Development
Technology
Telecoms
Web Development

If you would like to contact one of our experts for free initial advice, complete the quick enquiry form to receive a no-obligation review of your R&D Tax Relief claim.

March 5, 2019/0 Comments/by Samantha Holloway

Is R&D stagnating after a lack of funding?

Brexit, Business Tips, News, R & D Tax Credit

Is R&D stagnating after a lack of funding?

After positive trends in R&D tax credit uptake, the signals are innovation is still being held back by a lack of funding.

Figures released last month have left those involved in research and development (R&D) in the UK worried. The growth of R&D spending has slowed dramatically in real terms since the Brexit vote two years amid uncertainty in the business community.

Historically, spending on R&D hovered around just 1.1% of GDP, despite the introduction of government incentives like R&D tax credits back in 2000. This ranked the UK a shocking 11^thin the EU for R&D spend as a share of GDP.

The trend, however, since then was that more businesses were benefitting from R&D tax credits, with the latest figures showing that spending on R&D by UK businesses rose by 4.9%.

However, adjusted for inflation, this equates to just 2.9% which is the smallest increase, in real terms, for several years. This is indicating that, while there is an upward trend, the curve is slowing, and UK businesses are becoming weary of investing in R&D.

The Government realise that the current climate does not lend itself to massive investment in research and development. But in order to compete on the global market, UK companies need to be investing in R&D. The budget 2018 saw the Government’s pledge to raise the total of R&D investment to 2.4% of GDP by 2027, while also investing an additional £1.6 billion in its modern industrial strategy.

And it is needed, demonstrated by the well-documented demise of the Bloodhound SSC project earlier this month, which saw a UK engineering company try to build a car that could reach more than 1,000mph. The company saw its dream scuppered after it went into administration, due to £25 million needed for the final stages of R&D failing to materialise.

What are R&D Tax Credits?

The UK Government is aware that companies like Bloodhound SSC need help to push the limits of both research and development. And it knows that Britain is world-renowned for being a force in innovation and research. However, innovation is not cheap, so back in 2000 they introduced R&D tax credits.

These tax credits were put in place to encourage innovation in UK companies, in order to ensure they can compete with the biggest global superpowers. A staggering £21.4bn has been claimed in tax relief since 2000, in the form of 240,000 claims R&D tax claims.

Paired with special funding, grants, and various other hand-outs, R&D tax credits now help businesses put money into experimentation, research and development, without having to worry about the cost of any losses. They work by either reducing a company’s liability to corporation tax or by making a direct payment to the company.

These tax credits can help companies of various sizes across different industries take on new innovations that can get new products onto the market, or re-invent existing products to make them more efficient.

Is the issue lack of knowledge?

One of the reasons the tax relief is not being claimed is due to the lack of education around the tax break. Experts within the industry believe it has been advertised by the government to UK SMEs poorly.

Many SME business owners are simply unaware of the tax relief, owing to lack of advertisement and promotion.

Some are underclaiming due to a lack of comprehensive understanding about some of the subtle details of the R&D guidelines. In addition to this, some SME owners believe R&D Tax Credits are only available for traditional research sectors.

Many SME owners that we have come across simply think it is too good to be true, and there must be a catch. This is leading to many companies missing out on this legitimate financial reward for their valuable investment within their industry.

Samantha Holloway, CEO of rdtaxcredit.org.uk, commented:

Our figures show that forty six per cent of small business innovators who don’t use government support simply didn’t know it was available in the first place.

R&D stagnating is down to many factors, but this is surely the first one to tackle. Educating business owners that help is out there to invest in research and development.

We would like to see an increase in awareness of R&D tax credits in particular, especially where a small business does not actually have a new-to-market product, but is simply depending on these tax credits to innovate in order to improve productivity.

In addition to this, companies need to better understand the implications of Brexit on R&D tax credits. After Brexit, the UK Government will be free from EU regulation in relation to a subsidy limit, meaning an EU cap will be potentially removed. If this is the case, our prediction is that R&D tax relief would be a massively important element of the UK’s R&D policy, particularly in relation to SMEs.

How can rdtaxcredit.org.uk help?

We offer a friendly and professional approach to R&D Tax Credits which includes:

A free no obligation initial review.
100% success rate
30 day quick turnaround

We also provide extensive information on our website should you wish to research R&D Tax Credits in further detail. We have information relating to individual industries such as:

Audio and Visual
Building Technologies
Commercial Printing
Creative Digital and Media
Food and Beverage
Health
Manufacturing and Engineering
Marine
Motor Racing
Pharmaceutical
Software Development
Technology
Telecoms
Web Development

If you would like to contact one of our experts for free initial advice, complete the quick enquiry form to receive a no-obligation review of your R&D Tax Relief claim.

March 1, 2019/0 Comments/by Samantha Holloway

Law Firms Missing out on R&D Tax Relief

Business Tips, News, R & D Tax Credit, Uncategorized

Law firms missing out on R&D Tax relief

New figures show that law firms are overlooking the government incentive, with nearly 9 in 10 law firms eligible.

Thousands of law firms could be missing out on potential tax savings in the form of R&D tax relief, new research has found. Figures suggest that the majority of businesses in the legal sector have developed new products or businesses processes in the past two years.

The R&D figures for law firms

The research shows that an incredible 87% of businesses in the legal sector could be eligible for the R&D tax relief, an incentive the government provides to promote innovation.

A Censuswide survey of 1,000 senior and middle managers in law firms across the country found that 80% of firms had heard about the tax incentive, with only half (47%) ever claiming. The reasons given were that they either believed they did not qualify, or they mistakenly believed it would cost them money to put in a claim.

The law firm execs also vastly underestimated the true value of an R&D tax claim. Across the 1,000 surveyed, the average SME R&D tax relief claim they believed to be true was just under £17,000.

They were, in fact, nearly £30,000 off, with the average claim for their sector being approximately £46,000.

Samantha Holloway, CEO of rdtaxcredit.org.uk, commented:

What we are seeing here is a misunderstanding by law firms on two counts. The first being those legal businesses who believe they don’t qualify for R&D tax, full stop. The second is related to those who realise they do qualify, but grossly miscalculate what is actually owed to them.

This leads to law firms and legal businesses up and down the country missing out on a tax relief that is owed to them – a tax relief that the government actually encourages.

It would appear many law firms are overlooking this legitimate financial reward for their valuable investment within the legal industry, simply through a lack of education.

To remedy that, we can explain exactly what R&D tax credits are.

What are R&D tax credits?

R&D tax credits, or Research and Development tax credits, are a tax relief designed to encourage investment in research, development and innovation across the UK. They work by reducing a company’s tax bill by a certain percentage of qualifying R&D expenditure, or by a payment in cash, again linked to qualifying R&D spend.

The tax relief was implemented in 2000 by the UK Government, and since then a staggering £21.4bn has been claimed by companies across the country, in the form of 240,000 claims.

Reports suggest that the average claim for UK SMEs for R&D tax relief hovers around £43,000 – £62,000. The claim can be backdated by up to three years, meaning if your legal business has already taken part in research and development, you could be sitting on extra cash.

In addition to this, the R&D does not necessarily have to have been successful to qualify, which is an area companies are often mistaken on.

R&D tax credits are championed by the government, with Chancellor Phillip Hammond announcing in the most recent budget the government’s pledge to raise the total R&D investment to 2.4% of GDP by 2027. The Budget report also touted an extra £1.6bn for its modern industrial strategy. All of this should put the tax relief in the forefront of company owners’, and law firms’, minds.

What counts as research and development?

If you are law firm and answer yes to any of these questions, you are carrying act activities that count as R&D. Do you:

Carry out research and development in the field of technology or science?
Develop or design a project that overcomes difficult technological problems?
Create new processes, products or services?
Make improvements to existing processes, products or services?
Use emerging technology to reinvent processes, products or services?

An advancement of overall knowledge

However, sometimes simply developing new products is not enough in the field of R&D tax. Also ask yourself these qualifying questions:

Does the advance extend the overall knowledge or capability in the field of science or technology and not just the law firm’s own state of knowledge or capability?
Does the project involve an uncertainty that competent legal professionals cannot readily resolve and where solutions are not common knowledge?

Examples of successful R&D tax claims can be projects involving the adaption of premises and software development, automation of admin, website rebuilds, and the adoption of emerging technologies within their workforce.

In addition to this, in order to claim the SME R&D tax fund, you will need to ask yourself, is your law firm an SME?

Definition of an “SME”:

Less than 500 Staff
Annual turnover not exceeding €100m or an annual balance sheet figure not exceeding €86m

If this sounds like your legal business, and you have answered yes to the above questions, we are highly confident that you could be entitled to a share of the £21.4bn that has already been claimed by companies in the UK.

How can RDTaxCredit.org.uk help?

RDTaxCredit.org.uk are able to help law firms across the country claim R&D relief, leaving them with more cash to re-invest into their legal business. We have of experience in helping law firms quantify how much their claim could be worth, investigating the actual work to see if it is eligible, while also helping and advising on the claims process.

Our team of Chartered Tax Advisers can ensure you have a robust claim that identifies qualifying R&D and the associated costs. We can assist in the preparation of the R&D claims and submission of the claim to HM Revenue & Customs.

We handle the R&D Claim from start to finish and we produce the technical report on your behalf that helps R&D Tax inspectors understand your work and approve the claim.

At rdtaxcredit.org.uk, we understand that beginning to think about claiming R&D Tax Credits may be a little daunting, especially if you have never claimed the tax before. We want to help you through the process, to ensure you receive the financial reward that the Government wants to give you.

We offer a friendly and professional approach to R&D Tax Credits which includes:

A free no obligation initial review
100% success rate
30 day quick turnaround

If you would like to contact one of our experts for free initial advice, complete the quick enquiry form to receive a no-obligation review of your R&D Tax Relief claim.

February 26, 2019/0 Comments/by Samantha Holloway

New Cap for SME payable R&D Tax Credit Claims

Business Tips, News, R & D Tax Credit

New cap for SME payable R&D tax credit claims – All your questions answered

Will your SME be affected and, if so, how can you prepare for the new cap?

For companies relying on R&D tax credits it was a mixed 2018 Budget day. Chancellor Phillip Hammond announced the government’s pledge to raise the total R&D investment to 2.4% of GDP by 2027. The Budget report also shouted about an extra £1.6bn for its modern industrial strategy, ensuring that British companies stay at the forefront of world-leading industry.

However, with the good news came the sting of a new cap for payable R&D tax credits. This came in the form of a PAYE and NIC restriction surrounding the amount that can be claimed. Below, we guide you through all of the potential questions UK SMEs may have in relation to what the cap means for them.

What is the new cap to payable R&D Tax Credits?

A change in legislation was announced which will see the Government reintroduce a cap on the SME payable R&D tax credits. The cap relates to the PAYE and NIC paid by SMEs within a claimable period.

The proposal states it will introduce a cap of 300% (or three times) the company’s total PAYE/NIC payment for the period.

Before 2012, however, the Government were not so lenient and you could not claim R&D tax credits if you had paid no PAYE or NIC. This was abolished after 2012, with the government now reintroducing the policy with the added three times PAYE/NIC leniency.

Why has the new cap to R&D Tax Credits been introduced?

The PAYE/NIC cap has been introduced to ensure businesses are acting legitimately and to guarantee the tax relief is fulfilling its intended purpose.

It has been positioned by the government as an anti-fraud measure. HMRC uncovered a total of £300m in fraudulent claims by “artificial corporate structures”. This was occurring where structures had been set up to claim the payable tax credit despite having little or no employment or activity in the UK.

Who will be affected by the cap on R&D Tax Credits?

The most likely to be affected by this cap are SMEs who are in the early stages of their life. Generally speaking, start-ups do not employ many employees and often use contract workforces for projects.

Those who do not have permanent employees will not be paying as much as PAYE/NIC as those who do. Companies that are flexible in relation to employment, who use different skill sets for different projects, and are heavily weighted towards third-party costs rather than salaried staff, are the most likely to be hit by the cap.

The Treasury has stated that close to 95% of companies currently claiming the payable credit will be unaffected. However, consultations are to be carried to both confirm that is true and to ensure the impacts are minimised.

How will the new cap to R&D Tax Credits affect SMEs?

Essentially, after the change, an SME’s salary bill will affect the value of its R&D Tax Credit claim. SMEs will have to think about how they resource their business, as it could have an impact on the value of the payable credit.

SMEs will need to reassess their ratio of costs to ensure they are paying enough PAYE/NIC to claim payable credit. They will need to weigh up the pros and cons of the personal tax efficiencies versus the benefits of the business paying salaries and then receiving cash credit.

It is also worth bearing in mind that the cap will only apply to claims for payable tax credit, and will not affect the calculation of the enhanced R&D expenditure.

What are payable tax credits?

Understandably, not everyone understands the ins and outs of payable and non-payable tax credits, so we have a simple explanation below:

Payable tax credits

These are also known as non-wastable, or refundable tax credits. They are not limited and can exceed the value of any tax liability, including a liability of zero. This means they can exceed any tax debt, and can also be paid directly to an individual or company in cash. This type of credit is solely what the new cap relates to.

Non-payable tax credits

These are also known as wastable, or non-refundable tax credits. They are limited in value to the value of your tax liability. Therefore, these tax credits can only ever be granted to individuals or companies with tax liability (a tax debt).

Tax liability

A tax liability is the total amount of tax debt owed by an individual, corporation or other entity to a taxing authority, like HRMC.

When will the new cap on payable R&D Tax Credits come into place?

With this being a relatively big change in how R&D Tax Credits are claimed, the government has factored in time for consultation.

The initial proposal sees the cap starting on or after 1^stApril 2020, which should give HMRC enough time to minimise disruption.

This also gives SMEs enough time to prepare and act now in anticipation of the coming changes.

How can RDTaxCredit.org.uk help?

The proposed changes are significant and will fundamentally change how SMEs apply for R&D Tax Credits. By discussing these issues now, SMEs can be better prepared to reduce any potential changes to cash flow.

RDTaxCredit.org.uk can add real value here. We can advise on how to take action now in order to protect your SME payable R&D tax credit. Now, more than ever, it is vitally important SMEs understand what they can claim for, the process of the R&D tax credit claim, and all of the pitfalls many SMEs encounter while applying.

Our expert team of accountants are committed to working with you and your company to provide strategic R&D tax credit advice in the wake of these changes. We can review how it may affect your claim and propose new techniques to ensure you claim the maximum amount you are entitled to.

At RDTaxCredit.org.uk, we understand that beginning to think about claiming R&D Tax Credits may be a little daunting. We want to help you through the process, to ensure you receive the financial reward that the government wants to give you.

We offer a friendly and professional approach to R&D Tax Credits which includes:

A free no obligation initial review.
100% success rate
30 day quick turnaround

Contact one of our expert advisers today for a free initial review, and see if you can claim back some much needed tax relief.

January 26, 2019/0 Comments/by Samantha Holloway

8 in 10 Transport Firms Missing Out On Huge Tax Relief

Business Tips, News, R & D Tax Credit

Figures show the majority of UK transport firms could claim for R&D tax credits, but aren’t.

Transport firms are the lifeblood of the UK, consistently keeping the country running smoothly throughout the year. Without their hard work and long hauls every day, UK business would simply collapse.

Transport firms also need as much help financially as they can get in this current climate. Figures show that the transport industry is one of the most at risk in the wake of no deal Brexit, and in the face of an unsure future, firms need to be as vigilant as possible.

That is why the news that 56% of transport firms do not know about the government incentive, R&D tax credits, is particularly startling. These firms are potentially throwing away millions of pounds every year, due to investing in new products and business processes that could be covered by the tax relief.

How many transport firms are missing out on R&D tax relief?

Figures show that only 46% of UK transport firms have heard about R&D tax relief, with just a quarter (25%) claiming it. The firms who are aware of the incentive but aren’t claiming are doing so because they either do not believe they qualify, or they mistakenly believe that it could cost them money to claim.

This is in line with UK averages across other industries. Incredibly, the average percentage of eligible firms that have ever claimed R&D tax credits is 37%.

Official Government statistics do show an upward trend in claim value, however. The HMRC R&D tax credit statistics 2018 report showed that there was impressive growth in claim value in Transport & Storage, which saw a 42% increase. This indicates both an increase investment in R&D in transport, but also that those who are aware of the relief and are understanding the claims process a little more.

Samantha Holloway, CEO of rdtaxcredit.org.uk, commented:

The figures show that not enough is being done to educate UK transport firms about the tax relief they are entitled to.

So many companies we come across believe research and development is about lab coats and space rockets. It is much broader than that, and many transport firms who are eligible are missing out.

What are R&D Tax credits?

R&D tax credits can help to reduce a limited company’s corporation tax bill or be claimed as a cash sum reimbursement from the HMRC.

The UK Government is aware that Britain is world-renowned for being a force in innovation and research. However, innovation is not cheap, so back in 2000 they introduced R&D tax credits.

These tax credits were put in place to encourage innovation in UK companies, in order to ensure they can compete with the biggest global superpowers. The Research and Development that takes place does not actually even need to be successful to qualify, and claims can be backdated by at least two years.

It is a hot topic in government too. Chancellor Phillip Hammond announced in the most recent budget the government’s pledge to raise the total R&D investment to 2.4% of GDP by 2027. The Budget report also touted an extra £1.6bn for its modern industrial strategy. In the past the government has also made administrative changes to the R&D expenditure credit in order to increase the certainty and simplicity around claims. Put simply, the government want you to claim this tax relief.

How much are transport firms missing out on?

Since the tax relief was introduced in 2000, an incredible £21.4bn has been claimed by UK businesses. On average, an SME’s claim is equal to almost £54,000 – an amount which no transport executive would turn their nose up at.

The recent figures show that the transport executives who are claiming could be underclaiming by more than double the amount they are owed – on average an underclaiming of £24,955.

Executives believed the average claim value for R&D tax relief to be just £21,045, when the true figure for firms in transport is £46,000.

This is incredible, when thinking about the fact that those transport firms in question have undertaken an average of £333,738 worth of research and development over the past two years.

Relief can be as much as 230% of qualifying R&D costs if you are a small or medium sized enterprise. You can claim R&D tax credits on day-to-day costs and qualifying expenditure, including costs for staff, subcontractors, materials, software and utilities.

If you do fall into the category of SME, you can deduct a 130% of qualifying costs from annual profits, in addition to the normal 100% deduction – making the deduction 230%. If the company is loss making, you can claim a tax credit worth up to 14.5% of the surrenderable loss.

Is my transport company eligible for R&D Tax Credits?

Firstly, this particular tax relief is in relation to SMEs. Is your company an SME?

Definition of an “SME”:

Less than 500 Staff
Annual turnover not exceeding £100m or an annual balance sheet figure not exceeding £86m

Next, your company needs to be taking part in “Qualifying Activity”. This includes:

Qualifying Activity:

Creating new products, processes or services.
Changing or modifying an existing product, process or service.
Activities aimed at obtaining new knowledge.
The search for alternatives for materials, devices, products, processes, systems or services.

Many companies carry out eligible R&D activities without realising that their work qualifies for this little known tax relief.

How can RDTaxCredit.org.uk help?

RDTaxCredit.org.uk help companies across all sectors with claiming R&D relief, leaving them with more cash to re-invest into their business. We have of experience in dealing with many transport companies.

Our Team of Chartered Tax Advisers ensure you have a robust claim that identifies qualifying R&D and the associated costs.

We can assist in preparation of the R&D claims and submission of the claim to HM Revenue & Customs.

We handle the R&D Claim from start to finish & we produce the technical report on your behalf that helps R&D Tax inspectors understand your work and approve the claim

We offer a friendly and professional approach to R&D Tax Credits which includes:

A free no obligation initial review.
100% success rate
30 day quick turnaround

If you would like to contact one of our experts for free initial advice, complete the quick enquiry form to receive a no-obligation review of your R & D Tax Relief claim.

January 18, 2019/0 Comments/by Samantha Holloway

UK SMEs owed £84Bn in R&D tax relief by Treasury

Business Tips, R & D Tax Credit

Research shows the government is sitting on billions in unclaimed tax relief.

Research into R&D tax credits for SMEs has shown that only around 1% of UK small to medium businesses have ever claimed the relief.

With SMEs not claiming what they are entitled to, the Chancellor of the Exchequer is sitting on an SME goldmine worth £84.2bn, data suggests. To put this into perspective, this is approximately twice the annual budget of the Ministry of Defence, and enough money to run the NHS for eight months.

What is the R&D Tax Relief?

The simple reason the tax relief is not being claimed is due to the lack of education around the tax break. Experts within the industry believe it has been advertised by the government to UK SMEs poorly.

R&D tax credits were created in 2000 by the government as an incentive for UK companies to invest in research & development. A staggering £21.4bn has been claimed in tax relief since then, in the form of 240,000 claims.

These tax credits were put in place to encourage innovation, in order to ensure the UK can compete with the biggest global superpowers. The tax relief can help reduce a company’s corporation tax bill, or can be claimed as a cash sum reimbursement from the HMRC.

Companies can claim relief on research and development costs in relation to, in the government’s words, “a project that seeks to achieve an advance in overall knowledge or capability in a field of science or technology”.

However, this is slightly misleading, as the companies in question do not need to be researching brain surgery or creating a new jet engine. Companies can claim relief on a whole host of research and development projects, including a new recipe for beer, hazardous substance management, an engineering process, or new processes for web development.

How many UK SMEs are missing out on R&D Tax Relief?

There are approximately 3.5million SMEs actively trading in the UK, with 57% of them eligible for R&D tax credits. Of the 57% eligible, only 1% have ever claimed the relief.

This means that approximately a staggering 1.97million SMEs are potentially owed tax relief.

The trend in uptake, however, is positive. For 2016-17, 39,960 R&D tax credit claims were made, with over 34,000 of these being made in the SME R&D scheme. This figure is still incomplete, however, due to the delay in reporting. This figure is expected to rise, meaning the full amount will equal the highest ever tally in the 18 years since the tax relief initiative has been in place.

How much is the R&D Tax Relief worth to SMEs?

The fact that only 1% of those eligible are claiming the tax relief is even more astounding when you factor in the average claim for SMEs. Reports suggest that the average claim for UK SMEs for R&D tax relief hovers around £43,000 – £62,000.

The claim can also be backdated by up to three years, meaning if SMEs have already taken part in research and development, they could be sitting on extra cash.

These figures are incredible when thinking about the current business climate and the headwinds many companies face in today’s market. £50,000 is an amount which would be invaluable to any business.

How can rdtaxcredit.org.uk help?

There were nearly 7,000 first time applicants last year, and if your company was not one of them, your competitor may well have been. These were UK SMEs in a whole range of sectors, actively involved in R&D, investing time and cash on improving products and services, and being subsidised by the government to do so.

At rdtaxcredit.org.uk, we are helping many SMEs to understand this little known tax relief better. While we believe the government needs to do more to educate businesses in relation to R&D tax credits, our experts are also providing SMEs with information, and guiding them through the step-by-step process.

We are also educating SMEs that are aware of the tax relief, but are simply not getting the most out of it. Some are underclaiming due to a lack of comprehensive understanding about some of the subtle details of the R&D guidelines. In addition to this, some SME owners believe R&D Tax Credits are only available for traditional research sectors.

Many SME owners that we have come across simply think the tax relief is too good to be true, and there must be a catch. This is leading to many company owners missing out on this legitimate financial reward for their valuable investment within their industry.

Get in touch for advice

We offer a friendly and professional approach to R&D Tax Credits which includes:

A free no obligation initial review.
100% success rate
30 day quick turnaround

Contact one of our expert advisers today for a free initial review, and see if you can claim back some much needed tax relief.

January 14, 2019/0 Comments/by Samantha Holloway

Why your start-up needs to understand R&D Tax Credits

Business Tips, News, R & D Tax Credit

Ensure your company gets the best start by taking advantage of this government incentive.

Starting a business is one of the most exciting and exhilarating times in your life. Your business is your brainchild with all your efforts going into nurturing your ideas. It also takes a huge amount of courage and commitment to finally take the plunge into the start-up world.

Much of the planning of setting up your business will have been centred around branding, how the business will operate, what the website will look like, but not much thought will go into what the government can offer you as incentives. For some start-ups, the notion of R&D tax credits does not even cross their mind.

We are giving you the opportunity to learn about R&D tax credits so that your business gets the best possible head-start. With this government tax relief, you can give your new company a much needed boost.

Why does my start-up need R&D Tax Credits?

We don’t mean to scare you if you have just set up a company, but the fact remains that studies from Company House show 8 out of 10 start-ups fail within their first year. While the UK has become a hub of entrepreneurial spirit and flair, many companies find it tough in their first year due to underestimating competition and, crucially, a lack of financial planning.

One of the reasons start-ups run out of steam is running out cash. A key job of the business owner is properly prepare the business financially, to lead to a positive cash flow.

In a start-up it is fairly easy to focus on driving revenue and looking at profits, while ignoring the implications of insufficient cash resources. Cash flow management is crucial in ensuring employees and third-party suppliers can be paid, ensuring operations can continue undisturbed.

There is also a lot to think about when running a start-up. Hiring staff, buying supplies, working out the dynamics of your team, looking out for competitors. With all of this going on, R&D tax relief can seem like a bridge too far for many. Many entrepreneurs believe it is something to come back to when their business is further down the link. This is wrong, as R&D tax credits can get start-ups through that initial cash-flow rocky road.

What are R&D Tax Credits?

R&D tax credits, or research and development tax credits, were created in 2000 by the UK government to help small and medium enterprises (SMES) invest in innovation. This is due to the UK government wanting businesses to flourish and compete on a global scale.

Paired with special funding, grants, and various other hand-outs, R&D tax credits now help small businesses like yours put money into experimentation, research and development, without having to worry about the cost of any losses.

The relief works by either reducing a company’s liability to corporation tax or by making a direct payment to the company.

This may sound like a difficult task. However, we have learnt through experience to teach SMEs and start-ups to never assume the work you are doing doesn’t qualify for the tax relief. Always ask a tax relief expert, as they may be able to identify some part of what you are doing that can attract help.

How much are R&D Tax Credits worth to my start-up?

A staggering £21.4bn has been claimed in tax relief since 2000, in the form of 240,000 claims.

Most start-ups would come under the SME R&D tax relief scheme. This means relief for start-ups can be as much as 230% of qualifying R&D costs if you are a small or medium sized enterprise. You can claim R&D tax credits on day-to-day costs and qualifying expenditure, including costs for staff, subcontractors, materials, software and utilities.

Even if your start-up is loss making, you can claim 14.5% of the loss as a tax credit. This equates to up to 33p for every £1 spent on R&D as a cash payment from HMRC. No start-up doing R&D work that might qualify can afford to ignore that sort of assistance.

In addition to this, and crucially, the work done on research and development does not actually have to be successful to qualify.

For 2016-17, £3.7bn was claimed by SMEs up and down the country, at an average of £53,000 per claim.

How can RDTaxCredit.org.uk help?

CEO of rdtaxcredit.org.uk, Samantha Holloway, said:

Entrepreneurs and owners of start-ups expect to work hard for funding, so they can initially be sceptical about this benefit. They think it is too good to be true.

However, R&D tax credits are a legitimate government program that rewards investments in innovation. It is a benefit every start-up needs to know about.

Our Team of Chartered Tax Advisers ensure you have a robust claim that identifies qualifying R&D and the associated costs.

We can assist in preparation of the R&D claims and submission of the claim to HM Revenue & Customs.

We handle the R&D Claim from start to finish & we produce the technical report on your behalf that helps R&D Tax inspectors understand your work and approve the claim

We offer a friendly and professional approach to R&D Tax Credits which includes:

A free no obligation initial review.
100% success rate
30 day quick turnaround

If you would like to contact one of our experts for free initial advice, complete the quick enquiry form to receive a no-obligation review of your R & D Tax Relief claim.

January 10, 2019/0 Comments/by Samantha Holloway

Any questions? Get in touch today on 0161 531 0007.