HomeRail NewsWhy aren't more companies claiming R&D tax credits?

Why aren’t more companies claiming R&D tax credits?

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Research & Development (R&D) Tax Credits can be a real benefit for qualifying companies. First introduced by the Government in 2000, they have provided over £6 billion in benefit to UK companies in the form of corporation tax reductions, repayments and even cash payments to loss-making companies.

So why aren’t more companies taking advantage of this generous relief?

We hear a lot of the following from company owners when we first meet them: “This is just what we do, it can’t qualify”, “But we only work on customers’ projects”, and “HMRC don’t like giving money away”.

These are all common misconceptions. Any limited company can apply for R&D Tax Credits as long as they are undertaking research and development work to overcome a scientific or technological uncertainty. Understanding what this means can be a challenge but, in general terms, it applies to projects where the desired outcome may not be achievable. To assess this, research, testing and trialling needs to be carried out and there must be a genuine possibility that the project may fail and that associated expenses may not be recoverable.

Qualifying activities

The first part of our process is a no-obligation call to assess whether there is the potential for an R&D claim. While there are times when we advise companies that they are unlikely to be undertaking qualifying activities, the majority of the time we find there is something worth exploring.

We also hear “My accountants would tell me if we qualified for R&D Tax Credits, wouldn’t they?”

Again, this is true in some circumstances, but while a lot of accountants are experts at the numbers side of an R&D claim, they can often struggle when it comes to identifying the type of work and projects which can qualify. We have built our business through establishing relationships with accountancy firms and working with them to identify where their clients could be missing out.

Many believe that although they are undertaking qualifying activities, as they are loss making and have no corporation tax to pay, they cannot make a claim.

Loss-making companies can benefit from R&D Tax Credits and in such circumstances there is the option to surrender losses for a cash payment, injecting much-needed funding into companies which may otherwise struggle to move forward with their projects.

Two-year limit

Finally, some companies would like to explore R&D Tax Credits but keep putting it off, unaware that there is a two-year time limit from a period end in which to submit a claim. With the average R&D claim creating a benefit of around £50,000, UK companies could be missing out on millions of pounds of corporation tax relief.

If you think R&D Tax Credits may be an option for you then please get in touch and we can tell you pretty quickly if it’s worth investigating further.

We will be exhibiting at Infrarail for the first time this year so, if you are there, pop along to stand A71 and we can answer any questions you may have about R&D Tax Credits.

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