A Brief Guide to Know About R&D Tax Credit and Its Benefits

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Investment in R and D work is encouraged by the government to promote national economy. Businesses find such tax credits valuable to them not in terms of money savings but also to attract investors as well as enhancing their value. In order to realize the benefit from this scheme, you need to find out whether your business invests in R and D activities, and is it possible to benefit from tax breaks to take them further.  

Who is eligible for R&D Relief?

The type of R&D tax credits relief that will benefit your business depends on the size of business and whether or not the project is subcontracted to you. SME R&D relief can be claimed by an SME if it meets following conditions:

  • has less than 500 staff
  • has a turnover of approximately €100m
  • has a balance sheet total below €86m

SME R and D relief enable firms to:

  • deduct 130% of qualifying charges from their annual profit, and the normal 100% deduction to arrive at a total £230% deduction
  • claim a tax credit when business is making a loss of approximately 14.5% of the surrender able loss

About R and D Expenditure Credit

Enterprise level firms can claim an R and Development expense credit for working on research and development projects.  It can even be claimed by large and SMEs companies who were subcontracted to perform R&D activities by a large firm. Services offered by DSM R and D Tax Credits are geared towards providing full R & D tax credit entitlement to their clients in the UK.

How to find that your business qualifies for an R&D Tax Credit?

To receive R&D relief from the UK government, your company must show how your qualifying project:

  • Make efforts to excel in advancement in the technologies and hard sciences
  • Make attempts to overcome a new uncertainty

One should note that your advancement in science and technology need specificity. It can’t fall within social sciences or theoretical fields.

What can help your business avail tax credit?

  • Display the scientific processes that are used in the execution of R and D processes to efficiently overcome the uncertainty.
  • If you wish to obtain a tax credit, you need to show your work. Also, provide descriptions of failures and successes that you encountered while performing the task.
  • Prepare yourself to show why professionals failed to assist you by describing previous failed attempts in searching for a solution.
  • Actively engage in below activities:
    • Spending on materials and consumables used in the process
    • Forming new patents
    • Manufacturing new products
    • The bulk of such tax credits are filed by the manufacturing industry across different industry domains such as computer, appliance, chemical, machinery manufacturing, technical, scientific services, wholesale, finance and insurance, and retail trade.

Conclusion

The UK government offers tax credits that directly benefits SMEs whose R and D activities result in losses. By equipping yourself with an in-depth knowledge on R and D tax credit will help you claim it and reap benefits out of it.