Date
08 Mar 2023Category
R&D Tax CreditsMany SMEs still don’t realise that they qualify for research and development (R&D) tax incentives. As businesses contend with the economic challenges and the continuing threat of recession, this relief could provide a valuable cash injection.
However, as noted in our recent insight, significant changes are to come into force from April 2023. These changes represent a reduction of more than 30% in the tax benefit to most SMEs undertaking R&D activity.
On the flipside, in what was regarded as a ’rebalancing’ of the two R&D relief brackets, larger companies or those making a claim under the R&D expenditure credit (RDEC) scheme will see an increase from 13% to 20%.
With this in mind, planning around R&D tax is crucial to achieve the best outcome, especially if the goal is to reduce tax liability.
To help businesses understand the scheme and the possible opportunity, we explore the key details below.
The R&D tax relief scheme is designed to incentivise innovation within the UK and reward companies conducting research and development. It’s important to highlight that the benefit is only available to limited companies.
The scheme falls into two brackets:
The qualifying criteria for the SME scheme is as follows:
Other factors that can impact SME status include:
The Revenue are closely monitoring claim submissions due to fraudulent activity and a year on year increase in filings. It is therefore critical to partner with a trusted advisor and ensure the claim is robust and compliant.
For companies undertaking R&D projects and subsequently incurring R&D expenditure, there could be significant tax savings or cash repayments available. The benefit of R&D tax credits can vary considerably depending on how the relief is applied. This is why careful planning is paramount to ensure that this R&D benefit is utilised in the most efficient manner.
Broadly, to qualify for an R&D tax credits claim, a company’s project must seek to achieve an advance in science or technology through the resolution of scientific or technological uncertainties. This R&D definition can lead many to believe that the activities they undertake and expenditure they incur are not qualifying.
However, in our experience, clients often do not realise the potential for R&D in their work. Business owners and senior stakeholders are therefore, in some situations, not making the most of R&D incentives and the tax savings the scheme offers.
Some high-level questions to ask to help identify R&D claims opportunities are:
We will assist our clients in preparing a technical and financial analysis of their claim, in accordance with HMRC’s new disclosure requirements. We always undertake a best advice tax planning exercise on the impact of your claim.
Once filed, we will see the claim through to its HMRC processing. Unlike most others in the R&D tax consultants world, we ensure your refund is sent directly to you by HMRC. In the event that HMRC want to review the claim, we can handle the full enquiry process on your behalf.
If you have any questions on the scheme and the process for claiming R&D tax relief, please get in touch with a member of our specialist R&D team or your usual Azets advisor.
