Research & Development Tax Relief – exploring your field while protecting your purse
Did you know that if your business has a research and development arm, you can potentially benefit from very generous tax relief?
If you’re a SME and you are involved in advancing knowledge in the fields of science and technology, you are in a particularly good position to receive tax relief on your R&D expenses. For expenses prior to 1st April 2023, you could get 130% relief; For expenses since then its 86%
What is considered Research and Development?
The term is actually very broad. Your business could be involved in working in a particular field and your R&D is based on increasing knowledge for the benefit of all. Or it could be looking into improving your products and services for the benefit of your customers. Unfortunately, it doesn’t qualify if the knowledge or improvements you are seeking is for your use only.
But because it’s so broad, having someone experienced in R&D tax relief on board can save you time, energy and possible fines. Knowing exactly what you can claim takes an expert eye. And now it’s easier to find someone who really knows what they’re talking about. HMRC have introduced new rules that help you to combat fraud by advisors you may hire. You will be required to give the details of any advisors you use and in some cases notify HMRC of your intention to claim before you fill out any forms. From 1st August 2023 you will need to submit an additional information form to support your claim.
HMRC’s website states quite clearly that your R&D has to be recognised as innovation in science or technology.
How do I get the tax relief?
There are two ways you can receive R&D tax relief – as a tax credit or reduction of your corporation tax.
Costs you can claim for include utilities including fuel, power and water, salaries, pension fund contributions, National Insurance and materials, including software licenses.
And if, at the moment, you are making a loss, you can claim a payable credit. For surrendered losses before 1st April, that would be a 14.5% credit. Since 1st April 2023 it is 10%.
Tip It is important to do some tax planning with your accountant here as, with corporation tax rates rising, it may make sense to carry the loss forward to offset against future profits which could be charged at 25%.
If you think you qualify for R&D tax relief, it’s important to be very clear about how you process your claim. HMRC will carry out checks on your claim, so make sure you have a guiding hand to help you return accurate information.
If you would like to know more about reaping the benefits of R&D tax relief, contact Grant-Jones today and we’ll be happy to talk you through your options.
