Why do so many British Companies ignore R & D Tax Credits?

The Government wants to give money back to British Companies that undertake research and development. Unfortunately many Managing Directors and Finance Directors and even their Accountants concentrate on the word ‘research’ and not on the word ‘development’ and so believe that this means that they will not qualify. In many cases this will not be true and so they are missing out on this very useful source of funding. If you are developing a new product or service, or making improvements to existing products and services you may very likely be eligible. Even software companies have been successful.

 The scheme is designed to encourage and reward innovation. It allows innovative companies to either recover Corporation Tax paid and or receive a rebate of the NIC/PAYE generated by the business. Most first time claimants are able to also submit a claim for the last two completed year ends.

The average claim in the first year is £40k

Britain has the lowest uptake of this scheme across Europe less than 8,000 SMEs claimed last year. But it is estimated by HMRC that there should be 150,000 companies applying in the UK.

 The reason why most companies do not apply is that they do not believe they do” R&D”.

Many see R&D as something done by men in white coats in a laboratory rather than the development of a product.

They also often look at the scheme on the HMRC site and are intimidated by the terms used and often their external accountants advise them not to claim.

80% of clients either looked at this scheme at some point and thought they did not have a claim.

Typically claimants should have the following characteristics:

·         The company must be a UK Limited company

·         The company must have paid either Corporation tax , NI & PAYE

·         For any project to be valid the company must have taken a financial risk.

·         Projects that have failed can also be included

·         Innovative projects

·         Projects undertaken that seek to be greener more efficient

·         The work of sub-contractors can be included.

What type of companies would meet the criteria?

·         Software companies

·         Technology companies

·         Broad based manufacturing

·         Anyone who is “innovative” and produces a product of some kind

So if you are developing a new product or service and can identify the costs involved, then you may be throwing money away by not investigating the likelihood of making a successful claim. This should not be based on the Financial Directors or your accountant’s opinion, but on the opinion of specialists in this field. You have nothing to lose and a lot to gain as most specialists work on a success fee only basis. So contact a specialist today and see you can get the Government to send you a cheque.