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The Number Of New Technology Startups Is Still Soaring

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New figures show that last year saw a further increase in new firms in the technology sector.

Data from Companies House released this week has shown that there were 11,864 software development and programming businesses incorporated in 2018, an increase from 10,394 the year before.

The increase has coincided with the Government’s plan to boost creativity in the UK amongst tech firms, with a huge haul of patents being recorded in the past year, and the value of the technology sector booming to more than £180 billion last year.

 

The North West sees biggest increase

Interestingly, it was not just London that saw increases, like in 2017 where the capital was seen to have a monopoly of tech firms. Instead, it was the North West that saw an incredible 48% increase in tech firms, the highest growth of any UK region.

Property prices and technological availability have meant that other parts of the UK are now seeing increases. The South East saw 1,398 firms incorporate, a two per cent rise. There were also 422 new tech firms in the East Midlands, up 22 per cent from 345 in 2017.

London saw 4,752 incorporations in this sector, representing a 14 per cent increase.

 

Technology is a key factor pre and post-Brexit

Amongst all of the uncertainties surrounding Brexit, business owners and politicians alike have consistently used the technology sector as a flag-bearer for the UK economy.

Despite the deadline of Brexit fast approaching, with negotiations seemingly coming to a halt, the Government has backed technology firms to be a key pillar of post-Union life.

This is why it has supported tech firms for the past few years, with growing emphasis on future inventions through incentives such as the Patent Box and R&D tax credits.

Samantha Holloway, CEO of R&D tax credit firm rdtaxcredit.org.uk, commented:

It is brilliant to see this positive trend of new technology businesses, despite the current economic uncertainty surrounding Brexit.

This is a clear indication that UK entrepreneurs are keen to innovate and development new products and services, and the Government is backing them.

The challenge facing these entrepreneurs in the technology arena is the ability to develop at speed and scale-up, fast. Luckily, there has never been a better time to be a business owner in the technology industry, with many funds and grants on offer, such as the R&D tax credit.

 

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, particularly in technology firms. 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.

They can be used as a vital part of a start-up’s cashflow, when cash is often hard to come by.

 

What qualifies for R&D tax?

If you are technology firm and answer yes to any of these questions, you are carrying out 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 advancement 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 technology 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.

 

What’s the catch with R&D Tax Credits?

There are many technology firms missing out on R&D tax credits for a number of reasons. Many tech 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 tech firm owners believe R&D Tax Credits are only available for traditional research sectors, like medicine.

Many tech firm 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 company owners missing out on this legitimate financial reward for their valuable investment within their industry. The Government itself says of R&D Tax Credits:

R&D tax credits are a tax relief designed to encourage greater R&D spending, leading in turn to greater investment in innovation. They work by either reducing a company’s liability to corporation tax or by making a payment to the company.

 

How can R&D tax help?

This is where rdtaxcredit.org.uk come in. Our experts can guide you through the R&D tax credit process, taking you through the process of which grant is right for you, knowing what you can and cannot claim for, and being able to write the perfect technical narrative which is vitally important in the claim process.

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.

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Does Size Really Matter?

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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.

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Five Tips for Businesses in 2019

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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.

 

  1. 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.

 

  1. 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.

 

  1. 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.

 

  1. 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.

 

  1. 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.

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.

 

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Law Firms Missing out on R&D Tax Relief

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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.

 

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New Cap for SME payable R&D Tax Credit Claims

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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 1stApril 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.

 

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

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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

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.

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

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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.

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.

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?

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 start-ups across the UK.

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

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

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.

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How will Brexit affect R&D Tax Credits?

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Will the Government incentive for research and development be affected after Brexit is invoked next March?

It seems to be the word on everyone’s lips – Brexit. And rightly so, as many companies are gearing up for a brand new world outside of the European Union after 29 March 2019.

Opinion is still split, but early indications are predicting a turbulent time for UK business. Data analysis by Magic Circle law firm, Clifford Chance, has suggested that automotive, agriculture, food and drink, and chemicals and plastic industries will be hit the hardest, with tariff and non-tariff costs reaching up to £27bn for exporters.

This means now, more than ever, companies need to be astute in regards to financial planning, including tax planning.

With this in mind, Brexit is an area we have been asked about a lot, as many companies are concerned that the R&D Tax Credits they have come to benefit from will be taken away, or reduced. Below, we discuss this matter and try to ease any fears.

Does the EU have anything to do with R&D Tax Credits?

R&D tax relief is a UK Government-run incentive, so on the face of it you would assume that the EU do not have any power in relation to the tax relief. However, R&D tax relief comprises of two separate schemes running parallel to one another.

The first is the RDEC, or the Research and Development Credit scheme, formerly known as the Large Companies Scheme. This scheme is aimed at larger companies, with more than 500 employees and a turnover more than €100 million (or a balance sheet more than €86 million).

The second is the SME scheme, which to the UK is far more lucrative than the RDEC scheme due to the amount of businesses that fall into this category. This scheme is regulated by the EU, operating under what is known as the State Aid rules.

State Aid legislation ensures that EU members do not assist companies over a certain amount, in order to avoid potentially distorting competition among member states. It is a cap that ensures no EU member obtains an unfair advantage by subsiding R&D tax relief more than an agreed amount.

After Brexit, the UK Government will be free from EU regulation in relation to a subsidy limit, meaning this 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.

 

Will R&D Credits still exist after Brexit?

It is hard to talk in absolute certainties in relation to anything Brexit related, so we will tread carefully here.

However, from the impression we are receiving from the UK government, and going off past policies in relation to R&D, we can deduce a number of positives. Theresa May’s post-Brexit government has already recognised the importance of stimulating business in the UK through R&D grants. In fact, their own studies have suggested that £1 of R&D tax relief leads to £1.53 – £2.35 back in expenditure, stimulating the UK economy, whilst fuelling innovation.

The government also showed their willingness to support R&D tax relief in 2012 when it lifted the cap on payable tax credits. It also demonstrated a commitment to the tax relief in last year’s Autumn Statement when it increased the RDEC tax relief from 11% to 12% for qualifying expenditure incurred after 1 January 2018.

The most recent budget saw positive steps too, with the government committed to raising the total R&D investment to 2.4% of GDP by 2027, a reported extra £1.6bn.

So, from the general attitude towards R&D tax credits from the UK government, we can deduce that a post-Brexit UK will still see this government incentive thrive.

 

What can my business do before Brexit?

While we would like to know what a post-Brexit Britain looks like, none of us have a crystal ball. A lack of the details in relation to no-deal, hard and soft Brexit, can leave hard-working companies in the UK left in the dark a little in regards to what their next steps are.

Our advice is this – in the uncertainty of Brexit it is now more than ever companies need to be prudent with their tax relief efforts. We can predict with a fair amount of certainty that R&D tax credits will exist after 29 March 2019, meaning that companies should be thinking now about their tax relief.

We will believe the R&D tax funding system will remain healthy, with more and more businesses applying for relief – an average of £53,000 per claim.

 

How can rdtaxcredit.org.uk help?

At rdtaxcredit.org.uk, we understand that Brexit can be a minefield to even begin to think about. Add the idea of claiming R&D Tax Credits, and all seems a little daunting.

However, we want to help you through this process, to ensure you receive the financial reward that the UK 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.

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Report reveals R&D Tax Relief Claims are rising

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If you are not claiming this Government incentive, the chances are your competitors are.

Last month the Government released new figures in relation to companies claiming R&D (research & development) tax credits, and the outlook is positive.

In the eighteen years the tax relief incentive has been implemented, there is an upward trend of UK businesses discovering and utilising the initiative. Over 240,000 claims have been made in that time – a total of £21.4bn being claimed.

 

What are R&D Tax Credits?

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.

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.

 

R&D Tax Credit Claims are on the up

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 amount will equal the highest ever tally in the 18 years since the tax relief initiative has been in place.

The Government report also hinted at businesses understanding the claims process a little more. The total amount of R&D support claimed by businesses actually increased by a staggering 25%. It would seem this was due to businesses having a better understanding of what they can and cannot claim for.

This brought the total claimed for 2016-17 to £3.7bn, an average of £53,000 per claim.

 

What kind of companies are claiming R&D Tax Credits?

The HMRC report shows that the sectors that benefitted the most from this tax relief in 2016-17 were:

  • Manufacturing;
  • Professional, Scientific and Technical;
  • Information and Communication

These sectors had the greatest volume of claims. Combined, they accounted for a total of 71% of all claims, and 75% of the total amount of money claimed for 2016-17.

However, this figure may be slightly misleading, as many more companies can, and do, apply for tax credits. Currently, the industries that can apply for R&D tax credits include, but are not limited to:

  • 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

The tax relief also covers both SME and large companies, in all of these industries, with SMEs taking up the majority of claims.

 

Ensure your competitors aren’t getting one up on you

While the trend is positive, the report suggest many companies who are eligible are still not claiming R&D tax credits. 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.

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

The outlook of these figures is undoubtedly positive, however there is still a lot to in relation to educating UK businesses about this Government incentive.

We often speak to business owners who simply have no idea this relief existed. If companies are not claiming this tax relief, they may not be innovating to the best of their ability.

 

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.

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.

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R&D Tax Credits For Medical 3D Printing Companies

With the advancement of 3D printing technology, inventors are able to manufacture medical devices to be used in the human body. Processes like these are submittable in an R&D Tax Credits claim.

Conventional medical technologies can no longer keep up with the pace of 3D printing innovations. This industry can now create complex geometries within printed medical devices which are fully customisable to suit the patient.

The 3D printing industry is expected to grow in excess of 25% over the next five years and will become an impressive £2 billion industry by 2020. Companies within this sector should now look to engage with a specialist R&D Tax Credits advisor to ensure they obtain the full relief possible to aid further growth. Eligible processes must meet the criteria below:

  • New or improved products, processes, or software
  • Technological in nature
  • Elimination of uncertainty
  • Process of experimentation

Eligible costs include but are not limited to:

  • costs associated with developing a patent
  • employee wages
  • cost of testing
  • cost of supplies
  • contract research expenses

Advances in 3D Printing

Historically, the medical industry has utilised material technology for implants involving ceramic and metals. Although advancements are still being made using the older technology, it has limits when you consider the efficiency of the medical implant or device.

Typically, the dilemma is to either mass produce an implant with the ‘one size fits all’ approach which has health complications for the patient. Or create a custom implant, but due to the costs, not everyone will be in a position to be able to benefit from a bespoke service.

With 3D printing however, medical professionals can now offer a custom implant or medical device at a much reduced cost. It is revolutionising the industry.

Advancements in material technology allow 3D printing using materials such as cobalt, titanium, composites, chromium, stainless steel and other metals. An advantage also comes in the form of performance, outlasting implants using the traditional methods.

The process for creating 3D printed implants starts with CAD (computer Aided Designs) drawings or MRI (Magnetic Resonance Image) and gives the finished products a more natural anatomical geometry.

This new technology is also being advanced in the areas of bone replacement and scaffolds that help the human body produce natural bone growth. This improves the stability of the implant long term.

There are still challenges with 3D printing but it is undoubtedly improving the quality of medical devices, The advantage of using 3D printing to create medical devices is the ability to customise the device to meet the patient’s specific needs; however this is also one of the biggest hurdles in standardising a manufacturing process. It is not a one size fits all scenario. When printing companies produce these medical devices, there is also a requirement to ensure that the device meets all safety standards.

When it comes to medical devices, biocompatibility is a primary concern that needs to be addressed. Companies which develop medical devices must conduct extensive testing on other products if biocompatibility information is not available for a particular material. There are many initiatives underway, such as the Biocompatibility Consortium for Additive Manufacturing, an initiative which aims to analyse biocompatibility of different materials.

Example 1 – 3D Printed Hearts

Such is the advancement in 3D printing that recently scientists in Switzerland were able to produce an artificial human heart made of silicone. As there are around 26 million people who suffer from heart failure around the world, the ability to produce an artificial beating heart would have huge benefit within the healthcare industry. Further research is currently ongoing as the silicone material used in this experiment began to break down after an hour. However, the experiment does show that with the correct materials this will be a possibility in the not too distant future. It is almost certain that 3D printing will play a large role in the future development of artificial hearts.

Example 2 – Metal Printing Implants

Previously, implants needed to be attached to bone using a special cement but nowadays 3D printed implants give the opportunity to attach without any cement. It is possible that the implants could be printed with a textured surface surface which in time would allow bone ingrowth to support and connect with the implant.

At the moment, it is plastic and metal based devices which are used for these kind of implants. Both of these materials have issues that prevent the procedure from being as effective as it should be. The metal devices are very dense and therefore it is difficult to observe how well the bone is forming around the implant. Plastic alternatives are less dense but then this means that they lack strength to support the load and it is difficult for bone to form around this material. Research is ongoing to find a better suited material to be used for these implants.

Example 3 – 3D Printed Pacemakers

Pacemakers are a device which helps people with irregular heartbeats to control and monitor their heart rate. Electrodes are used to detect the electrical activity of the heart, which send the data via wires to the computer. When the data is assessed the computer will tell the generator to send electrical impulses to the patients heart in order to correct the heartbeat. There has been such advancement in biomedical science that 3D printers are now being used to develop pacemakers. Currently, pacemakers are a one-size-fits-all device but soon 3D printing will be used to develop a personalised pacemaker designed to correct an individual’s unique heart problems.

Summary

3D printing gives the health sector the ability to offer patients a better quality of care and is bringing down the costs and wait time. It is saving lives!

This technology can help manufacture bio-inert elements of the human body.

Companies engaging in sectors that utilise 3D printing are able to offset certain R & D costs from their tax returns, resulting in tax savings or even money back.

If you’re one of these companies, speak to an advisor today at RDTaxCredit.org.uk and receive a no-obligation R&D Tax Credits review. Click here to make an enquiry.

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