R&D Tax Credits: What is R&D and how can you claim?

Businesses should consider Research and Development (R&D) tax credits to provide extra liquidity and help secure their futures.

What are R&D tax credits?

In 2000, the government created the R&D tax credits scheme as an incentive for businesses to encourage them to invest in research and development, ultimately fuelling their own growth.

Any company that spends on new product, process or service development or enhancement is eligible for this scheme. These credits can be claimed in one of two ways: claim a cash payment or claim a reduction in corporation tax.

According to PfP, only 43,000 businesses have claimed R&D tax credits, which suggests that many are unaware of the scheme or their eligibility.

Businesses that are driven by innovation can use R&D tax credits to provide an extra source of liquidity to help secure their futures. Additionally, government schemes and loans from creditors can have significant wait times, whereas tax credit applications can be a much faster way to obtain extra cash, as HMRC commit to maintaining the timeframe of 28-42 days to pay.

Can I claim R&D tax credits?

It is worth considering your businesses activities to assess whether you can claim R&D tax credits, as opportunities are often missed. HMRC notes that credits can also be claimed for unsuccessful projects.

To be eligible for the scheme:

• Your company must work on innovative projects within science and technology
• Your project may research or develop a new process, product or service or improve on an existing one
• In your claim, you must be able to demonstrate:
  Advances in the field
  That a professional in the field could not work this out
  Uncertainty and how the project overcame it.

It may also be worth checking previous claims of this nature to ensure your business has claimed the maximum amount that it was eligible for.

We have helped companies by making successful R&D claims on their behalf resulting in significant tax savings. For additional information on the above or if you would like to discuss a potential claim, speak to one of our R&D advisers.