If you’re spending money on research and development (R&D) activities, your business could benefit from either a lower tax bill or a cash refund from the government.
If you’re a small or medium-sized business, for every £100,000 you spend on R&D, you can receive a £230,000 deduction from your corporate taxable profits. This could trigger a cash refund of up to £26,000 if your business is profitable. If making a loss, the cash refund could increase to £33,000.
How do you know if your R&D qualifies? You may be able to claim R&D tax relief if you:
- manufacture something;
- carry out any design work;
- have developed your own software;
- have developed any processes, including software that improved internal efficiencies;
- use existing technologies in a unique way or combine them in an original manner.
Even R&D projects that ultimately fail could qualify for the relief. The key principle is that your R&D activity needs to be advancing science or technology through resolving uncertainties.
This means that, contrary to what you might assume, your business doesn’t have to be based in a research lab or operate in a scientific sector to be able to assess R&D tax relief. This is proven by the experience of Wimshurst Pelleriti, an award-winning London-based architecture firm, which benefited from a valuable R&D tax relief claim worth around £40,000.
The firm’s work is based on the belief that good architecture should not just succeed on an aesthetic or economic level, but should also be forward-thinking and enhance the health and wellbeing of the individuals and community it serves. Its approach integrates research and development and the use of innovative materials with a willingness to view problems from all angles and deliver a positive social impact. The firm also develops its own buildings, giving it great insight into both design and construction processes.
Although the architecture firm could see that R&D tax relief would be beneficial, its main challenge lay in understanding how the scheme applied to its work. For example, what uncertainties was the firm addressing and what technological advancement was it seeking? Business advisory firm Moore Stephens was able to provide the necessary guidance and support. Its R&D team was led by a civil engineer specialising in R&D and, through posing pertinent questions, helped the architecture firm understand how to portray its qualifying activities to HMRC. The questions often led the architects to identify other projects that could meet the qualifying criteria. Moore Stephens then guided the firm through the whole claims process, ensuring that all potential qualifying activities and costs were included. This led to a successful R&D tax relief claim, resulting in the architecture practice enjoying its cash benefit.
Moore Stephens says getting expert help to make your claim is the best way to increase your chances of receiving the maximum cash boost. Contact the firm’s specialist R&D team for more information.