Experts have called on the UK’s businesses to ensure that they are taking full advantage of claiming R&D tax credits.
R&D is a Corporation tax relief that may reduce your company’s tax bill but can only be claimed if your company is liable for this type of tax.
According to HMRC findings, there is a slight increase in the number of claims being made from small and medium sized firms, however, there are those who believe that the scheme is being underused by too many businesses.
Jenny Tragner, director of R&D tax credit consultancy ForrestBrown, commented, “We see that day-in-day-out. Either businesses just didn’t know about the scheme, or they thought they didn’t qualify. There are still a lot of companies that aren’t claiming that should.”
Tom Byng who is the tax partner and head of R&D group at MHA Macintyre Hudson, added, “Over the last year, HMRC has given out £2.9bn across a range of industries, a 20% increase from the previous year. Around half of this was claimed by SMEs, an average of almost £61,000 per company.
“The new data shows the number of claims has risen by 19%, but this is still less than 1% of UK companies. A large number of eligible businesses are not claiming as they just don’t realise the extent of activities that can be claimed for.”
He explained, “The scheme helps businesses remain competitive in a global market, and any boost is particularly important with Brexit on the horizon. R&D tax relief can provide additional cash tax savings of 26% of a company’s R&D spend, or if not profitable, a cash credit of up to 33.35%.
“R&D has a much wider definition than many people think – it’s not just white coats and laboratories. Although there are many claims in software development and manufacturing, successful claims have also been made in industries as diverse as agriculture, construction and hospitality.
“The tax relief available is very generous, but businesses need to bear in mind that claims must be properly made to ensure they meet HMRC requirements.”
How do I claim for R&D?
The normal time limit for making your claim is two years after the end of the relevant Corporation Tax accounting period.
Government guidance says in order to claim, you will need to:
‘Put an X in either box 99 (SME) or box 100 (large companies) of your CT return, and in both cases, put the enhanced expenditure in box 101 – that is, the actual amount spent multiplied by 230% or 130% as appropriate. You should also include this enhanced figure in your calculations of the profit (box 3) or loss (box 122) for the period.
If your company or organisation is a SME and you want to convert some or all of the tax relief into payable tax credits you’ll also need to put the amount payable to you in box 87, box 89 and box 143 – and put an X in the ‘repayment due for this return period’ box on page 1.
Although it’s not a legal requirement, HMRC encourages companies to:
- Tell them why the company or organisation considers its project(s) to be allowable asR&D
- Provide a summary of the costs incurred on theR&D and how the figures in the return were arrived at’
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