Thursday, 16 July 2020
R&D tax relief can help companies move forward into the “new normal”
With the uncertainty facing many companies because of coronavirus and the subsequent lockdown, many companies are currently looking to boost cash flow. One way to do this, which is frequently overlooked, is claiming R&D tax relief, says Scott Burkinshaw. The Shorts Accountants tax partner, who is head of the firm’s Radius service for claiming innovation tax relief, says it can be a quick, efficient way to get cash back into your company – reducing corporation tax liabilities, generating refunds of tax from previous years, or even creating a payable tax credit from HMRC.
R&D tax relief was first introduced almost 20 years ago and is still widely under-claimed, even though the relief can be worth almost £25,000 in tax saved for every £100,000 of qualifying spend.
As claims can be made retrospectively for the previous two years, there are considerable amounts of cash to be unlocked by innovative companies.
If you have never previously considered your company making an R&D claim, or if you have claimed in the past but may not have maximised your claim, now is an excellent time to (re)consider making a claim.
Who can claim R&D tax relief?
R&D relief is available for companies seeking to achieve an advance in science and technology through the resolution of scientific and technological uncertainties.
One of the main reasons that the relief isn’t claimed by all those who are entitled is a lack of understanding of what this means in practice, with the level of innovation required to claim being overestimated.
It’s crucial to engage with an R&D specialist who fully understands the legislation and guidelines as to which activities do and do not qualify for relief to ensure your company accurately assesses its ability to claim, and that any claim is maximised.
For example, product development, process improvement and advances in software development can all lead to eligible claims.
The relief is available to companies in all sectors – manufacturing, food, rail, health, packaging and transport are all areas where we have recently helped companies claim relief, along with the science-specific sectors where you would expect to see R&D.
So why do businesses not claim for R&D tax?
Another reason why companies fail to claim is they overestimate the time required within the company to prepare and submit the claim.
It is understandable there are many demands on your time when you are running a company, and never more so than now as everyone adapts to the “new normal”.
The best approach has always been to minimise the amount of time a company has to spend on preparing the claim, and any good R&D provider should be able to work with the client to do most of the work.
There does have to be some level of input, particularly from the company’s “competent professionals” in the sector they work in to explain the technical advances and challenges in the R&D projects.
But, on average, this is usually about 1.5 to two hours of their time, which is not a lot if it can save thousands in corporation tax.
R&D tax relief in the “new normal”
The “new normal” has seen a switch from face-to-face meetings to interviewing the relevant staff virtually via Zoom and Teams, which avoids the time-consuming task of someone from the company writing up a technical report.
This information is used to produce a technical report that is submitted to HMRC along with the corporation tax return, but only after you have approved it.
This new way of working with clients to gather the information needed has worked well as business has adapted to making use of the technology to deliver business as usual.Back