“This isn’t R&D, I do it every day!”
“We can’t claim this as the project got cancelled.”
If a project is aborted due to overwhelming technological challenges – this is ironically one of the best examples of R&D for tax purposes! Remember, we are not looking for development that has sought to ‘boil the ocean’, nor development that is confined to laboratories. It is important to remember that this is ‘R&D for tax purposes’ and that there are specific guidelines that relate to this. We need to remember the reason why the scheme exists – to stimulate the UK economy and encourage it to invest in further development. It is not a reward scheme for the best scientific breakthroughs of the year.
The R&D tax relief and R&D tax credit schemes are recognised as the single biggest funding mechanisms to UK businesses.
“We don’t do the development in-house.”
If the costs are incurred by a UK entity, there may well be scope! Sub-contracted activities do qualify for SMEs.
We generally say that whole process should not take any more than half a day for a single member of your staff. In the most complicated cases, it could be one whole day. Given that the average claim produces a net cash benefit of £40,000, it could be the best hourly rate that you will find!
LinkStep forms alliances with accountancy firms. R&D tax is a unique area where you really need the input of finance, tax and technology specialists in order to confidently identify the full scope of your R&D claim.
We often review claims done by accountants and find that the historic claims have typically been very conservative in order to avoid submitting supporting technical reports or a potential HMRC enquiry. Where there is an HMRC enquiry, left unchecked, there is potential for it to get out of hand or set a low precedence for future claims.
We work with your accountant or finance function to compile the claim, and avoid the liklihood of an HMRC enquiry.
“We have a large amount of losses, I wouldn’t have thought there is any scope for an R&D claim?”
“We have made loads of profits this year, there is no way HMRC will give us cash!”
Companies with losses can use a claim to enhance their losses further, which can be useful to offset against future profits and corporation tax payments. SMEs can surrender these enhanced losses for R&D tax credits – cash paid in the form of a cheque from HMRC. SMEs also have options for releasing additional losses which can further add to the cash benefit.
Profitable companies get R&D tax relief on their corporation tax bill, regardless of how much profit they have.
The conclusion; an R&D claim, for a company with losses or profits, can generate a significant cashflow injection!