Research and development tax relief is a valuable tax incentive set up by HMRC to reward innovative UK Limited companies. Innovation is the essence of most successful businesses, however, there is a heightened aversion to financial risk. Nevertheless, the government incentives are designed to increase innovation in the UK and boost economic productivity.
The majority of business owners deemed it valuable and have taken advantage of the initiative by collaborating with Shencoh. They remark that innovation is a key aspect of their business success and plan to innovate over the coming years.
Finance Directors mention there is a clear discrepancy between a company’s intention to innovate, and the plans on how to best make use of the R&D tax incentive, therefore numerous businesses may be missing out on a vital source of funding.
The incentive has proven to have a paramount positive impact on businesses. As business owners use the incentive to consolidate their company’s overall financial position. A high percentage use the tax relief to reinvest into innovation, by creating new job opportunities or buying new machinery.
When companies are successful in their R&D tax claim, the tax credits are typically received in the form of cash payments or a corporation tax reduction, in most cases, clients receive the payments within four weeks of submitting their claim. This is immensely valuable to a business in mitigating and justifying their financial risk when investing in innovation.
Common Misconception Regarding Research and Development Tax Relief
A high number of businesses are either not using the incentive or not writing their claim right. Here at Shencoh, we believe that the definition of the term ‘research and development’ is unclear and misleading. The reason why companies aren’t claiming the incentive is due to the misconception that it doesn’t apply to their business.
To better understand the incentive, there is a need to fully grasp when and how R&D is carried out. R&D occurs when scientific or technological uncertainty is resolved or an appreciable innovation to an area is achieved. The definition is purposefully broad, as it can be applied equally throughout all sectors, products, processes and services.
For example, numerous clients didn’t know that changes or modifications to existing products could still be classed as R&D. Furthermore, a large percentage weren’t aware that unsuccessful R&D projects could also qualify. Moreover, a company may produce only one product that it continuously modifies and improves, leading to R&D, therefore the rules are designed to incentivise any activity that seeks an appreciable improvement.
Keep in mind that the definition of R&D is broad. As mentioned above, the definition is purposefully broad, therefore it is applicable equally to all sectors. You can always give us a call at 0161 757 3657 or email us at firstname.lastname@example.org to seek a second opinion on whether your business activity qualifies. By identifying all qualifying areas of R&D, helps maximise the potential claim.
Beingly able to present R&D claims to the HMRC using clear examples and explanation on how the business is conducting effective R&D, helps the process, as well as keeping a good record of investment in R&D enables the claim to be more precise.
Key Responsibility Within the Business
A common perception is that it’s down to the financial staff to deal with issues relating to tax compliance. However, due to the specialist level of insight required to assess if the work could qualify as R&D, it is important that technical staff are involved as they valuable insight.
A collaborative and open-minded approach will give companies the best possible chance of getting it right. Those that do, as we’ve seen, have gone on to make significant strides forward.
ShenCoh advice to innovative businesses is: if you’re not already claiming research and development tax relief, check you’re not missing out, and if you are, make sure you’re getting your claim right.
How Can SHENCOH Help With R&D Tax Credits Claims?
Have you created or undergone R&D and innovative materials? Shencoh can help you understand the complexity of R&D Tax Credits and what your entitlement is.
Take the R&D Eligibility Quiz to find out if you have qualifying R&D expenditure.
ShenCoh Ltd is an R&D tax specialist company, with methodology and practices recognised by HMRC. We pride ourselves on not taking more than 3 hours of your time from start to completion, on a no win no fee basis. If you are interested in learning more or need help putting a claim in, please fill in the contact form here or give us a call on 0161 757 3657.