Thinking of submitting a Research and Development (R&D) tax credit claim for your business? Great! But there’s a few things you need to know about beforehand to ensure your valuable time isn’t wasted and your claim has the potential for maximum success.
What R&D tax credits are
You might have briefly heard about R&D tax credits and of other businesses who have been granted up to thousands of pounds. Of course you’d want to jump on board and make a claim for your own business, but before you do so, make sure you know exactly what R&D tax credits are all about.
R&D tax credits are a UK incentive designed to encourage companies to invest in R&D. Companies can reduce their tax bill or claim payable cash credits as a proportion of their R&D expenditure. Expenditure in innovation including process improvements can qualify where staff costs, consumables and many other company costs are accumulated as part of the overall claim.
Ok, great – now you know what R&D tax credits are, but is your business eligible? R&D can take place in any sector – healthcare, food manufacturing and oil and gas, to name a few. Any limited company in the UK that is subjected to Corporation Tax could submit a claim, providing it has carried out qualifying research and development activities and spent money on the projects involved. The scope for identifying R&D is actually pretty huge, yet most businesses don’t even know that a project they’ve worked on is eligible for R&D. For example, ZLX recently worked with online pharmacy based in the Midlands of England who were unaware that they had been carrying out research and development during the building of the company. ZLX gathered all the information required, worked alongside the company’s accountant and submitted their claim to HMRC which was settled within 6 weeks.
The factors that could impact your claim
If you are ticking the boxes for the eligibility criteria mentioned above, excellent – but there are still some factors that could impact your claim. You need to be aware of these too. Firstly, many claims go wrong because of mistakes or inconsistencies in reports. In all fairness, it’s easy to make mistakes in reports as collating the correct technical detail and producing a qualifying innovation report requires technical knowledge. This is why businesses who plan to make a claim often choose to work with an R&D tax credit consultant. As for inconsistencies, these might flag up when costs have not been complied with the legislative guidance, for example.
Another factor which might impact a claim is grants or subsidies. If a business has received grants or subsidies, they may have to claim either partly or entirely through the Research and Development Expenditure Credits scheme. If your grant was for the purpose of the R&D project you are claiming for, the project will not be eligible for the SME scheme.
The required information and data
In order to submit a claim, you’ll need to provide a lot of information and you might want to have the information required on hand as soon as possible. According to HMRC, you’ll need:
- the start and end dates of the accounting period relating to the R&D activity – these should be the same dates as the period covered by your CT600 return
- your 10-digit company unique tax reference (UTR) number
- the total amount of tax relief you’re claiming
- a breakdown of your qualifying R&D costs
- your unrelieved trading loss for the claim period
To support and help your claim, you should also provide a short summary explaining how your project:
- looked for an advance in science or technology and aimed to achieve this advance
- had to overcome scientific or technological uncertainty
- overcame this uncertainty
- could not easily be worked out by a professional in the field
This might sound like a lot to take in, which is why the team here at ZLX are on hand to help.
ZLX specialize in providing senior experienced personnel in the fields of engineering and finance to collate information and data in order to provide expert reports that will combine to generate high end qualification to HMRC for engineering related tax credits.
Before we process our clients claims, we have a thorough process to ensure we’ve reached a comprehensive understanding of the business we are working with to help maximise the claims success.
You can get in contact with us here to arrange a chat with one of our friendly consultants to find out how we can help you discover the hidden value locked away in your business and potentially create cash for your company.