Research and Development (R&D) Tax Credits are something that the majority of companies should be looking at, however, unfortunately a lot of UK businesses are missing out because either, they’ve never heard of the scheme to begin with or they’re unsure as to whether they qualify.
Sound familiar?
For those of you who don’t know what R&D Tax Credits are, the scheme was set up to drive innovation and creativity within the UK by allowing organisations to reclaim up to 27% of their research and development costs.*
So in simple terms, if you have £100,000 of eligible R&D cost in your previous financial period - you could be entitled up to £27,000 from HMRC as a cash rebate.
So what are the most common misconceptions and what’s the truth behind them?
Myth #1: Only science and tech companies can claim
This is one of the biggest myths surrounding R&D tax credits. In truth, any company, regardless of which sector they operate in, that is involved in research and development can apply.
It could be app development, textiles, manufacturing, food tech, construction, bio-medical, electronics, transport and the list goes on. If you’ve developed a new product, system or process then it’s almost guaranteed that you are eligible to apply!
Myth #2: Loss making companies can’t apply
Even as a loss making company, you’re just as entitled to make a claim as those which are turning a profit. The idea of the scheme is to promote innovation, and innovation can happen regardless of how profitable your company is.
In fact, as a loss making company, you will be able to claim up to 27% of your Research and Development spend as opposed to profit making companies which can claim up to 21.5%. As long as you’re a UK Limited or PLC company, the money could be yours.
Myth #3: Companies that receive grants can’t apply
As a grant recipient, you are still able to take advantage of the Research and Development tax credit scheme as it’s an entirely separate pot of money.
As long as you fit the HMRC criteria, you can still submit a claim regardless how many grants are funding your projects. Review our R&D Tax Credit Guide to see if you meet the eligibility criteria or arrange an eligibility call with one of our team.
Myth #4: There’s no time limit on claiming
While it would be nice if companies could backdate claims as far as they liked, that is sadly not the case. In fact, there is a two year window in which you claim, running from the end of your accounting period.
For example, if your company’s year end was 30 April 2019, you would have until 30 April 2021 to submit your claim or else you will lose the tax benefit entirely.
Time to act
Given that the Research and Development tax credit scheme is such a well-kept secret, it’s hardly surprising that 90% of eligible businesses have never even registered a claim.
Now that you've read through the common myths, are knowledgeable, and believe yourself to be eligible, it is time to pick your R&D Tax Specialist.
Arrange an eligibility call with our team of experts at Claim Capital to learn more about the claim process and how we can help you reclaim up to 27% of your R&D spend.
*These are the updated figures in line with the new legislation announced in the April 2023 Spring Budget.