For startups and SMEs, a new year welcomes a re-energised team hungry to elevate the success of their business.
But to hit the ground running this January, many of you may be contemplating ways to revitalise your existing cashflow.
To reach your growth potential, the momentum of research and development (R&D) must be spurred by a stable funding strategy.
I know what you’re thinking. Easier said than done!
The truth is, a surprising amount of R&D-intensive businesses are missing out on an annual source of funding that’s non-dilutive and totally free.
This funding scheme is known as R&D Tax Credits, and if you’re developing an innovative product or service, it’s a vital contributor to your cash flow.
If you’re already claiming r and d tax credits, don’t go anywhere just yet. Our experts at Claim Capital often see that SMEs are undervaluing the size of their r & d claim and missing out on thousands.
This blog is going to share the tips you need to kickstart 2022 with an optimised cashflow and access the maximum benefit from your r&d tax credit claim.
💰 R&D Tax Credits, in a nutshell
R&D Tax Credits offer startups and SMEs the chance to claim back up to 27% of capital spent on research and development, after their first financial year.*
This substantial portion of cash, gained from R&D Tax Credits, provides the opportunity to reinvest into growing and scaling your business, without sacrificing equity.
So, which businesses are eligible for r&d tax relief?
Fortunately, companies of all sizes and industries can claim r and tax credits! The only requirement is that they’re undertaking research and development - activities that innovate and introduce new products and services, or improve existing offerings.
There are two branches that comprise the overarching R&D Tax Credit scheme, and determine how much money you can reclaim.
The first is SME R&D Tax Credits, which is the more conventional out of the two due to its accessibility. The qualify for r&d tax relief under the SME scheme, companies must have:
Less than 500 employees;
Less than €86m in gross assets;
Achieved less than €100m in turnover.
Within this scheme, the business’ financial position at the time of claiming also plays into the size of their r & d claim.
Loss-making companies are entitled to claim up to 27% of total research & development eligible costs, which is paid directly, in cash, into your bank account.
However, if you're profit-making, your business can be awarded up to 21.5% of total R&D eligible costs, this time in the form of a tax credit.
If you exceed the metrics of the SME R&D Tax Credit scheme, you’ll have to claim through the RDEC scheme instead. The RDEC R&D Tax Credit scheme is available for businesses with:
More than 500 employees;
More than €86m in gross assets;
Over €100m in turnover.
Unlike the SME scheme, the RDEC scheme awards a fixed rate of 20% of eligible R&D costs (subject to corporation tax). RDEC applicants, don’t be disheartened! Your substantial revenue ensures that 20% of R&D spending still represents a huge amount of cash.
📈 How to claim R&D Tax Credits, the right way
As research and development tax credits can be claimed annually, it’s important to know that your R&D advisor will maximise your claim, year after year.
As businesses progress along their growth trajectory, R&D spending will manifest itself on different scales, and in different areas. Efficient R&D Tax Credit claims are maximised by reporting niche, industry-dependent costs – which are often overlooked by general accountants.
At Claim Capital, our R&D Tax Credit specialists hold sector-specific expertise, that allows us to identify the full scope of eligible R&D spending, and reclaim every penny possible for our clients. By choosing the right advisor, the claim process is seamless.
Our 20+ years of experience has allowed us to refine the R&D Tax Credit submission process down to a science. Claim Capital pledges to complete your R&D Tax Credit claim within 3-5 days of receiving sufficient financial and technical information.
Another pitfall to avoid is paying a percentage-based fee for your r & d claim. Most advisors ask for 10-30% of your R&D Tax Credit benefit in exchange for filing your claim.
In the early stages of a startup, this may not account for a great deal of money. However, as your business grows year upon year, committing to percentage-based fees will significantly reduce the financial advantage that R&D Tax Credits offer.
At Claim Capital, we proudly operate a £3,000 fixed fee model - regardless of claim size. This allows our clients to keep hold of more of their money, and contributes to our overall mission of helping SMEs thrive.
🚀 Make 2022 your year!
The UK’s thriving research & development scene is a testament to the R&D Tax Credit schemes. When mapping out your strategy for 2022, funding from R&D Tax Credits can help fast-track your business towards its next phase of growth.
If you’re innovating a new product or service, and could do with starting the new year with a cash injection, arrange a free consultation with our R&D tax relief specialists today.
And remember - if you are already claiming R&D Tax Credits, now would be a great time to check whether your existing advisor is undervaluing your claim. Our team would be more than happy to look into this for you.
*These are the updated figures in line with the new legislation announced in the April 2023 Spring Budget.