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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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Six Reasons Your Investors Will Love R&D Tax Credits

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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.

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Is R&D stagnating after a lack of funding?

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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 11thin 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?

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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8 in 10 Transport Firms Missing Out On Huge Tax Relief

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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.

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.

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

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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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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Figures reveal Northern Businesses are overlooking valuable R&D Tax Credits

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New official stats show that an abundance of Northern SMEs could be claiming R&D tax credits, with an average benefit of over £50k

Running an SME can be hard at the best of times. Small business owners have to handle an array of challenges including selling, delivering, financing, managing and growing their brain-child with little or no staff, while trying to make it a success all at the same time.

It is, therefore, a very pleasant surprise to any SME owner when an unexpected advantage comes along. The latest advantage comes in the form of R&D tax credits.

R&D tax credits were created in 2000 by the Government as an incentive for 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.

This, however, is only scratching the R&D tax credit surface, as a new Government report has revealed that thousands of Northern England SMEs are eligible for tax relief and are still missing out.

The R&D Tax Credits Statistics

Statistics released a fortnight ago show that £350m of R&D tax relief was claimed by northern companies during the 2016-17 fiscal year. This represents a 19% increase in the previous year, indicating that companies are beginning to understand the tax relief a little better.

The Number of Claims – UK-wide

RD Tax credits

So far there have been 39,960 claims for 2016-17, of which 34,060 are in the SME scheme. The number of claims has plateaued from the previous year, but the figures are still incomplete.

It is estimated that claims for 2016-17 will increase once the all of the data has been compiled, meaning it will be the highest since the tax relief began.

The figures clearly show that the number of claims has steadily grown over the past 17 years, with an SME’s claim valuing almost £54,000 on average – an amount which would be invaluable to any business.

The Total Money Claimed – UK-wide

rd tax credit

In all, Government stats show that, so far, £3.5bn of R&D tax relief support has been claimed for 2016-17.

It is estimated, with data revisions, that this will rise to the highest total the tax relief has seen in its eighteen years.

Regional R&D Tax Credit Statistics

In relation to Northern SMEs, there were a total of 7,305 claims, with a total value of £300m.

rd tax credits

*Numbers: actual
*Amounts: £ million

The figures show that many, many more SMEs in the North West, North East and Yorkshire & Humber could be claiming R&D Tax Credit.

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

There are many SMEs missing out on RD tax credits for a number of reasons. Many northern 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 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.

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

We are speaking to lots of local small and medium-sized enterprises who are not aware of the money that they are owed. 

The statistics show that less than five percent of SMEs that are potentially eligible to claim R&D tax credits have not made a claim.

We are looking to remedy this by educating businesses, and guiding them through the claims process, step by step.

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

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:

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.

 

Images sourced from:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/742661/Research_and_Development_Tax_Credits_Statistics_September_2018.pdf

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