As COVID-19 continues to impact on the day-to-day operations of businesses, considering all potential sources of finance and short-term cash is key. Cashflow management will be vital now and in the coming months in order to identify shortfalls and areas in which you can make savings.
One option to explore is Research and Development (R&D) tax credits, which are available for companies working on specific projects to develop new products or services, change processes or to do things differently.
Companies that are eligible for the tax incentives are extremely diverse and, at Hazlewoods, we consider that using the term ‘R&D’ for this tax support is not helpful and can often discourage some companies from looking into the opportunity. However, those businesses that recognise that the tax support is focused at ‘on the ground’ activities can reap considerable benefits.
What are R&D tax credits?
The key features of R&D tax credits schemes are:
- Retrospective ‘subsidy’ of up to 33.3% of qualifying expenditure identified i.e. the company has already incurred the costs against which the finance is available.
- Accelerated processing by HMRC; in most cases, the cash payment is received by the company in just over one month from the filing of the claim.
- Relatively straightforward paperwork; unlike grant funding, the application is ‘free-form’, through an amendment to the company’s self-assessment tax return.
R&D encompasses a much wider range of activities than most companies realise, and it does not just relate to the development of new products. If your company has previously undertaken technically challenging work, you should explore whether you are eligible for R&D tax credits.
Who can claim?
All companies, large and small, can claim if they undertake qualifying work - even if they do not pay corporation tax because they are unprofitable.
Small- and medium-sized companies (mainly those with fewer than 500 staff), can generally claim a credit worth 25% to 33% of their eligible R&D expenditure, while for larger companies the credit is usually worth around 10% of the expenditure.
For our handy rates and rules guide to all things R&D tax credits, click here.
What should I do next?
Taking a practical look at the key business issues usually offers good scope for identifying possible R&D activities as a starting point for a claim.
If you are unsure as to whether your company qualifies for R&D, or if you would like to discuss your business, please get in touch with David Clift at david.clift@hazlewoods.co.uk or 01242 680000.
If you are not ready for a conversation, please just send us an email requesting a link to our handy app, where you can enter some of your details and get an instant response as to whether or not you may be eligible.
For further information and help for you and your business during the COVID-19 pandemic, visit our dedicated webpage here.