R&D tax credits catalyse innovation and growth, but they’re poorly understood and underclaimed.
Even for businesses used to claiming R&D tax credits, getting the best out of the schemes is a time-consuming endeavour.
If you’re unsure of the qualifying criteria and how to maximise your claim, chances are you’ll benefit from professional help.
This will also alleviate the tasks of claiming the credits and submitting the paperwork, which also requires a deep level of knowledge about how the schemes work.
Read on to find out why the expertise of seasoned R&D tax credit specialists is invaluable.
Understanding R&D tax credits
R&D tax credits are a government incentive designed to encourage companies to invest in innovation. They provide a valuable means of tax relief for businesses engaged in the development or enhancement of new products, processes, services, or technologies.
The scheme isn’t purely confined to technology or the sciences, however, and is available to many businesses that undertake qualifying activities.
In fact, business uptake of R&D tax credits has been historically low compared to how many businesses the Government estimates qualify. Avoid becoming part of that statistic by ensuring you don’t miss out.
In brief, qualifying activities might include:
- creating new products, processes or services
- changing or modifying an existing product or process
- conducting feasibility studies, testing new concepts or developing prototypes.
The role of R&D tax credit specialists
To benefit from the credit, companies need to navigate complex rules and regulations determining eligible R&D activities and expenditures.
The role of R&D tax credit specialists is integral to businesses that engage in various forms of research and development, which has a specific definition in the context of the schemes.
These professionals bring a wealth of knowledge on tax legislation and channel it to help businesses maximise their R&D tax credits.
Professional assistance can prove beneficial in several key areas, including:
RDEC and SME scheme selection
There are two R&D tax credit schemes, the RDEC and SME schemes.
R&D tax credit specialists can help companies understand which scheme to apply to, which varies based on company size, funding, and type of R&D work.
Broadly speaking:
- For larger companies or SMEs with certain funding or subcontracting arrangements, the RDEC scheme may be more appropriate.
- The tax relief can be significantly higher for smaller companies meeting the SME scheme criteria.
Qualification and eligibility
Specialists conduct comprehensive reviews of a company’s R&D initiatives to pinpoint those that qualify for tax relief.
They interpret the HMRC’s definitions and guidelines to identify qualifying R&D activities, requiring a technical understanding of the R&D process and a detailed grasp of tax legislation.
As previously highlighted, a greater number of businesses are eligible for R&D tax credits than commonly perceived, and these credits extend beyond the realms of technology and science, contrary to widespread assumptions.
Businesses across almost any sector can qualify for R&D tax credits, providing certain business activities and qualifying expenditures meet conditions.
Expenditure analysis
Specialists meticulously examine R&D expenditures to ensure that every eligible cost is included in the claim. This is crucial for optimising the benefits of the scheme, frequently leading to increased tax relief.
This includes:
- A systematic review of costs, including staffing, materials, software, utilities and subcontracted R&D expenses.
- Distinguishing between direct R&D costs and indirect activities that support R&D.
Claim preparation and submission
The preparation and submission of R&D tax credit claims is complex, and working with a specialist advisor can help you:
- Compile a comprehensive report that substantiates the R&D activities and expenditures.
- Ensure that the documentation meets HMRC’s rigorous standards for a claim.
- Articulate the nature of the R&D work in a way that resonates with the tax authorities, highlighting the innovation and challenges involved.
Ongoing advice
Last but not least, going beyond the numbers, these professionals offer strategic advice on structuring R&D projects and expenses to maximise tax credit recovery. They assist with:
- Implementing best practices for record-keeping that meet the HMRC’s requirements for R&D documentation.
- Advising on project management and accounting procedures to streamline the claim process for future periods.
- Developing a proactive approach to R&D tax credits that aligns with the company’s growth and innovation strategies.
Summing up
R&D tax credits stand as a valuable government incentive, leading to tangible savings for businesses across diverse sectors. Don’t dismiss your business activities simply because they may not initially appear R&D-related—there’s a possibility that they could still qualify.
Leveraging the knowledge of an experienced professional in R&D tax credits is essential for businesses aiming to initiate their benefits from the program.
James Scott has deep expertise in R&D tax credits and their many nuances. Contact us to learn more about how we can help you.