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
- Manufacturing and Engineering
- Motor Racing
- Software Development
- 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.