ARE YOU MISSING OUT ON R&D TAX CREDIT RELIEF?
If your business was offered free tax advice, helping you find out if you had money due to you from HMRC and taking less than a couple of hours to do so with no commitment or obligation until you know it is worthwhile to proceed, it would be crazy not to invest that time right? Yet by not looking into your eligibility through the governments Research and Development (R&D) Tax Credit scheme, thousands of UK companies are doing just that.
R&D Tax Credits have been around for almost twenty years. So why are so many SME’s and start-ups in particular missing out?
WHAT ARE R&D TAX CREDITS?
R&D Tax Credits are a government-backed tax incentive for all UK businesses to encourage growth and innovation.
Essentially, if any UK company performs (or attempts) innovative work that involves overcoming a specific scientific or technological challenge then R&D Tax Credits could well exist. It’s open to any company, not just science labs, aerospace or big pharmaceuticals, and you don’t have to re-invent the wheel or achieve a major breakthrough either to qualify. It can simply be the creation of a new product line, or upgrading a service. As long as a technical or scientific uncertainty is addressed, and money is invested in eligible R&D projects and costs, there may well be eligible spend.
It is a generous benefit also, with as much as 33p in every £1 of R&D expenditure reclaimable. The benefit can be claimed by way of tax rebate/saving, or for loss-making businesses, a cash award.
WHY ARE START-UPS MISSING OUT?
Here we look at the main reasons why so many start-ups and SME’s in general do not feel they would be eligible and therefore, have never claimed.
1. Our work is ‘day-to-day’ so probably wont qualify.
It’s surprising just how much of what businesses consider to be ‘ordinary’ work that does actually qualify. For example, engineers especially consider problem-solving to be “business as usual”, when in fact their problems are scientific or technological uncertainties, and their solutions qualify for R&D Tax Credits. Internal projects and prototypes are also likely to be eligible, even if they haven’t been a massive commercial success.
2. We can’t claim as we don’t have any employees.
It’s true that wages are one of the biggest components of most R&D Tax Credit claims. However, there’s no stipulation in the rules that says you must have employees. As long as you’re a UK-based limited company you can apply.
3. It’s too good to be true.
Entrepreneurs are used to working hard and don’t expect ‘hand-outs’ from the government. But R&D Tax Credits are simply about claiming back something you’ve already earned; it’s a legitimate government programme that rewards companies investing in innovation.
4. The business was LOSS making so probably wont qualify.
Not a problem – the government recognises that many start-ups take some time to start turning a profit. Therefore loss making companies are also welcome to claim R&D Tax Credits and will receive the relief in lump sum payments.
5. We can’t claim as we received COVID support from the government.
Just because a company has claimed government support during the COVID-19 pandemic, doesn’t mean it can’t then claim R&D Tax Credits. It may change the amount that can be claimed – and whether they should use the RDEC rather than the SME scheme.
This is simply because some types of government support, such as CBILS and Bounce Back Loans, are classed as notified state aid. And because the SME branch of the R&D Tax Credits scheme is already so generous, it’s not currently possible for businesses to claim two lots of state aid and still use the SME scheme.
The CBILS and Bounce Back loan schemes were both launched by the government to offer businesses emergency financial support during the pandemic. Note however that the money is meant to keep the business generally afloat, so you won’t be able to claim any element of the CBILS loan if it is specifically used on R&D work. So, if this is the case, you should deduct the total amount of the CBILS loan money you put towards your eligible expenditure from your claim.
6. We performed R&D, but the project didn’t work out.
Ironically, failure is a positive when it comes to claiming R&D benefit. Your R&D project may have been abandoned, postponed or was simply unsuccessful, regardless of which, you still ‘attempted’ to make an advance therefore your R&D costs may still be eligible, equally as much as in those projects that were successful.
7. It’s complicated. Where do i even start?
This is a often a common initial response, and we fully understand and appreciate why. Claiming R&D Tax Credits is notoriously complex, with the rules changing regularly.
The best advice is to speak to a company who does R&D as their primary offering. At Tychon you can book a FREE consultation where you will find out if you have eligible spend, if it is worthwhile proceeding and the options open to you. It costs NOTHING to find out and at least you will have asked the questions. HMRC are very picky on how an R&D claim is presented and do not take kindly to errors or ambiguity, even completely innocent mistakes.
Get it wrong and at best your start-up or SME will lose out on vital extra cash. Worst case is you could end up being investigated by HMRC which can be costly in both time and money.
8. It costs to apply for R&D Tax Credits.
Like everything in life, yes, it does. Tychon realise that SME’s, in particularly start-ups, often do not have a bottomless pit of money to throw around. Accountants and a lot of online solutions typically charge 20%-35% of the returned benefit, while others charge 3.5% of your ‘eligible’ spend. Tychon’s entire business model was set up to address this and make claims far more attainable and ‘worthwhile’ by introducing a pricing structure that benefits those with lower spends. (70% of all R&D claims in the UK are on projects with less than £100k spend). And remember, if it ain’t worth it, you simply don’t pay.
Tychon guide you through every one of our 5 Step process culminating in a session with a dedicated chartered accountant who will generate your complete, submit ready R&D Tax Credit report via the only fully automated solution in the UK. We are also on hand post claim to support you should HMRC require any further information, avoiding potential enquiries.
Book a FREE consultation. Call 0333 12 11 10 9 or say email@example.com