Misperceptions about R&D tax credits
Created by the Government in 2000, R&D tax credits can provide qualifying companies with very generous cash repayments. This is illustrated by the fact that the average value of a small and medium-size company (SME) claim stands at circa. £52,000, per the latest set of Government statistics.
Given the significant sums of money involved you would expect every company which could make a claim would be doing so. After all, it is free cash that can be used for any purpose. Surprisingly, the truth is far from this.
It is widely accepted that from the pool of companies that would be entitled to make a claim only 20% do so. So, what about the other 80%? Well, they miss out on what is often tens and in some instances hundreds of thousands of pounds each year. This is commonly referred to as the ‘claim gap’.
One small mercy is that you can go back in time to make a claim, but only a maximum of two accounting periods. Basically, you have two years from the end of your accounting period in which to make your claim.
So Why Do Companies Not Claim What They are Entitled To?
It is largely the result of two factors:
Not knowing that this relief exists; and
Not realising that what they do on a day to day basis could qualify.
Despite R&D tax credits being around since 2000 and continually being made more and more generous by each successive government, it still surprises me the number of business owners I meet that are not aware of the relief.
Less surprising, perhaps, is the misperceptions surrounding what does and does not qualify. A commonly held belief is that R&D tax credits are for the men in white coats of this world. If you do not have a PhD on the payroll and a laboratory on floor 2 you cannot possibly be eligible for this relief, right? This couldn’t be further from the truth.
R&D tax credits were created to benefit all companies. Whether you have developed new products, processes, services, software or devices, or simply made improvements to existing ones, you could potentially be able to make a claim. Even trying to copy a rival’s breakthrough could potentially be eligible for the relief. What company doesn’t try to continually improve its offerings and processes?
To make life easier for you, try our R&D tax credit calculator.
To unlock a higher level of rebate, you do need a specialist to look at this for you. There are plenty of software applications out there at the moment and even accountants are saying they can complete this work.
Well, they may be able to, but they will not be able to maximise your claim and neither will the software. I generally go by the rule; you get what you pay for. There are always corners we can cut, but there is then generally a price to pay.
So to maximise your R&D claim, please contact us.