Research and Development Tax
Research and development is key to the progress of economic growth and to the success of companies across a wide range of sectors. R&D can be expensive though, so it’s important to business owners to evaluate the risks of investing in their future and find ways of cushioning the blow if their investment doesn’t pay off. It is also vital that companies investing in research and development are encouraged to do so by the tax system, which is why UK companies are able to claim Research and Development Tax Credits.
For many companies, research & development tax credits can provide significant tax relief – and therefore the freedom to continue investing in products and processes. However, the scheme is being underutilised, with millions going unclaimed every year. One of the main issues is lack of awareness and understanding of the scheme, which leads to business owners not realising that they are eligible to make a claim. This myth-buster will help you to clarify the facts and ensure that your understanding of how the scheme works is accurate.
Myth 1: You have to prove innovation to receive R&D tax relief
This is not necessarily true. Whilst the R&D tax credits program is designed to encourage innovation, there is a wide range of eligible expenses that you can claim relief on as long as you can prove that they are directly related to your research and development activities.
Myth 2: R&D tax relief is for tech companies
Companies that invest in new tech are likely to be eligible for R&D tax relief, but technological advancements are only one of many purposes that can be cited when submitting a research & development tax credits claim. You don’t have to develop ground-breaking software to make a claim. Find out more about what you can claim for here.
Myth 3: R&D is only available to large, profitable companies
This is categorically untrue. R&D tax relief is available to businesses of all sizes and – whilst there are two different processes involved depending on your company size – significant relief is available to smaller businesses, regardless of whether they’re profitable or not. However, the amount you can claim is affected by how profitable (or otherwise) your company is. Find out more about how much you can claim here.
Myth 4: It takes ages to receive the tax relief
Historically this may have been the case, however a lot of work has been done to to reduce the amount of time it takes to receive tax credits for R&D expenses. Tax credits are released at the end of the financial year, but in some cases small and medium sized businesses may be able to access their tax credits more quickly.
Myth 5: I can only use tax credits to increase R&D spend
You do not have to increase your research and development budget every year to continue claiming R&D tax credits. As long as your expenses qualify and are calculated following the correct criteria, you will still be able to claim year-to-year regardless of whether or not your budget increases.
These are all common misconceptions and are just a few examples of the inaccurate beliefs held by some business owners, relating to R&D tax relief. It’s misconceptions like these which lead to the tax credits not being claimed by those who could well be eligible.
If you are unsure of whether or not you have grounds to make a claim for Research and Development Tax Credits, contact us today to arrange a free, no obligation consultation.
Note: Ascendis does not charge a fee unless your claim is successful and there is not obligation to move your accountancy arrangements to us if you do not wish to.