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Did you know that your company could receive a tax credit in relation to any Research and Development your company has carried out?
Research and Development (R&D) Tax Credits are a UK tax incentive designed to encourage companies to invest in R&D.
As a limited company, you are able to reduce your tax bill or claim payable cash credits as a proportion of R&D expenditure.
Myth Busters – the top four misconceptions dispelled
- We do not qualify – Many organisations do not view their activity as R&D, because it forms part of their day-to-day work. In reality, the vast majority of R&D tax relief claims relate to actual commercial development, meaning the ongoing activity of continual improvement of products and processes to improve quality, or efficiency, will qualify.
- The system is too complicated – Many SME companies feel overwhelmed by the complex definition of R&D, which underpins the relief, and simply do not have the resources available to get up to speed on this specialist area of taxation.
- Tax relief involves aggressive tax planning – This is an extremely common misconception that is often raised in relation to R&D tax relief. In reality, there is actually a huge distinction between R&D, which is a Government led incentive, and tax planning, where structures are used to acquire a favorable tax position.
- The relief is going to be scrapped – In reality, successive governments from different political parties have increased the claimable percentage over a 16-year period from 150% – 230% (in 2016). This means that the incentives are not only here to stay, but have improved in generosity over the years. However, if it does disappear the clear message is to obtain your legitimate claim whilst the incentive is available!
Limited companies are able to benefit from this tax rebate for both 2014 and 2015. A typical claim value can be £20,000 as a starting point, increasing to well over £50,000 depending on the size of the company.
However, if your company’s year end falls in December, a claim must be made by 1st January 2017 or all entitlement for 2014 will be lost.
Please contact David Nicklin for further information: 0800 634 4862