Are you claiming R & D Tax Credits?

April 1, 2020

We’ve just submitted a claim that has improved one of our clients cash flow to the tune of £35k. Want to know how?

There’s interesting and very positive news about research and development (R&D) tax credits.

R & D expenditure, or investment, is as it sounds. It’s the work a business conducts for the innovation and improvement of products, services and processes, ie when you spend money to develop a new product or service, or when you innovate to solve a problem or provide a solution.

The key thing is though – when defining it for tax purposes – is that you can’t buy or source an ‘off-the-shelf’ option or solution. Finding a way to develop it, or fix it yourself, generally involves a significant investment – often largely employee time – hence the tax breaks.

The R & D tax credit system allows for companies to claim tax relief of 230% of allocated expenditure against their corporation tax charge. The costs are generally already relieved anyway, so the additional 130% is extra tax relief.

An example: The Acme Company spends £100k on R &D. This enables them to claim additional tax relief of £130k at 19%, meaning £24,700.

Businesses can claim for the salary costs of employees engaged in R&D, all material costs and 65% of subcontractors’ costs.

Where a business isn’t paying tax because they are making a loss, a claim can be made for the tax relief to be repaid directly.

Some good breaking news as well – there’s been a further announcement that the support for furloughed employees will include employers’ national insurance and pension costs. That’s a very welcome initiative in these difficult times

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