Are UK Tech Companies ‘Getting It’ When it Comes to R&D Credits?
Linda Eziquiel, Principal Consultant at RandDTax, outlines three compelling reasons why UK technology companies should be looking closely at their eligibility to claim Research and Development tax relief.
Many commentators acknowledge that the UK’s technology sector is an important player in driving growth in our economy. It’s a success story that we can talk about with pride.
One of the factors underpinning that success is the investment being made by tech companies in innovation. Most would regard this as essential investment because if they don’t innovate they won’t survive, never mind lead the field.
Fortunately our government understands that innovation can be very difficult to fund especially for start-up and early stage companies. So there is government support in the form of R&D tax relief and credits. Yet it seems some companies are not aware of the R&D support schemes, or if they are, they are not claiming their entitlement.
What are the 3 most compelling reasons why you should claim R&D tax relief?
There are a few good reasons why it's important that you know whether you can claim R&D tax relief or credits for your company and if you can that you actually do so. Here are my top three reasons.
1. The R&D schemes are government schemes specifically designed to support investment in innovation
Some people mistakenly believe that the R&D tax relief schemes are tax avoidance schemes and are therefore wary of taking advantage of them. This is far from the reality as the R&D schemes are in fact UK government funded incentives designed to increase investment in innovation. Since they were first set up in 2001/2002 they have been much improved and supported by successive governments from across the political spectrum.
Studies indicate that innovative companies generally perform better than those that don’t innovate. Thus the investment of government funding in companies under the R&D schemes is believed to provide positive returns – by creating jobs and employment, economic growth and future tax revenues.
2. Compared to raising most other types of funding – claiming R&D relief or credits is straight forward
Growing and innovative companies often struggle to secure the funding they need to survive and thrive. In general it is far easier and quicker to make a R&D tax credit or tax relief claim than it is to get a loan or raise equity and venture capital or apply for a grant. However you do have to have spent money on qualifying R&D activities before you can reap the benefits. This is because R&D claims are made as part of your annual corporation tax return.
3. Tech driven developments often qualify as R&D for tax relief and credits
There is no doubt that a lot of tech developments qualify as R&D. So long as what you are doing is advancing the underlying technology, or the capabilities of what can be done using technology, you are likely to qualify.
You don’t need to be embarking on a ‘world first’ attempt to do something - if a similar process, service, product or device has been created by another company, but how they did it is a trade secret or does not fully suit your need or available products are too expensive for your purpose, or you feel that you can do it better, your developments will probably qualify as R&D.
How much can you claim?
The level of benefit you can claim if you qualify as a Small and Medium Enterprise (SME) is between 18% and 33% of your qualifying R&D expenditure (as at 2016/17 claim rates) – qualifying expenditure includes staff salaries and a portion of external developer costs.
It’s quite easy to find out if your tech developments qualify and finding out will cost you nothing as most R&D tax credit specialists don’t make any charge for an initial assessment. It can be done in as little as 10 minutes over the phone. All you have to do is call one!
You will want to know how much your claim is worth and most good specialists will make no charge to advise you on the potential cash benefit. They earn their fee from providing you with support once you have decided to go ahead. They’ll help you to make the case for your claim to maximise the total value and simplify the claims process for you. Since the fees you pay for assistance are commonly contingent on success, it’s a low risk process.
Request a telephone call now to find out if your company qualifies.
Are you ready to find out if you qualify or how much your R&D claims could be worth?