Top five R&D myths

While R&D is critical it can be costly, not only in itself but also that payback can take months, if not years. The UK has some of the most effective tax reliefs available for this type of expenditure in the form of R&D tax credits.

Companies involved in technological or scientific problem solving could benefit from a reduction in corporation tax liabilities or cash back from HMRC. R&D tax credits are unusual as they provide the taxpayer with the opportunity of claiming more in tax relief from HMRC than they have paid in tax. These credits are aimed at companies that are actively involved in R&D.

We have found that there are many myths surrounding R&D that have stopped companies from claiming R&D tax credits. Below are the top five myths.

1. R&D tax relief is only for companies with ‘men in white coats’
Incorrect. Whilst pure research usually qualifies for R&D tax relief, HMRC’s sector analysis of claims shows that manufacturing and business services are in fact the sectors where most claims are made.

Any company that is involved in technological or scientific problem solving could be eligible for R&D tax relief. This can include architects, software developers, manufacturing, engineering, construction or even demolition companies.

2. R&D tax relief is only for companies that are inventing something brand new for sale’
Incorrect. You do not have to be inventing a brand new product to qualify for this relief. More often than not it is claimed by companies who are improving existing products or internal processes.

Any company that is involved in technological or scientific problem solving could be eligible for R&D tax relief. This can include architects, software developers, manufacturing, engineering, construction or even demolition companies.

3. Customers have paid for us to carry out R&D and therefore we cannot claim.
Not necessarily the case. In certain circumstances it is possible to make a R&D claim for R&D work that a customer has asked you to carry out and have even paid you for.

4. We don’t pay corporation tax so there is no benefit for us
Incorrect. All companies whether they are large companies (after April 2013) or SMEs who are not paying corporation tax can actually get a cash credit through R&D – cash back in your bank account.

5. If we try to claim for R&D tax relief, HMRC will start investigations into all our tax affairs
Incorrect. All R&D claims are administered through specialist R&D HMRC offices. A quality report that is submitted with your claim should deal with all HMRC points of interest and concerns and not trigger an investigation.

For more information on how you could qualify, please view our R&D and grants services or contact Steven Levine.
 

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