03/06/2015

By Tami Briesies, Zazzle Media


It’s difficult running a small business. Long hours, hard work and fear of falling profits due to external factors all combine to make a business owner’s stress levels among the highest in the country. That being the case, news of any form of tax break is always cheering for any business owner.

The R&D Tax Credits

Many small companies aren’t aware that they can claim a tax credit for any research and development that they carry out. The company doesn’t necessarily have to be engaged in scientific or laboratory work, even architects or software developers are also eligible. The main criteria are that your company can claim back any sums it spends on research and development. Tax advisors inplus.co.uk have proved that any company that pays corporation tax could be eligible to claim back 32.6% of the tax they pay as a result of R&D tax credits.

Are you eligible?

The R&D tax credit scheme was introduced to encourage companies to plough back more into their businesses in terms of developmental research. This could apply to sectors as diverse as agriculture and fisheries to the construction and even health and support services.

The government website Great Business has stated that small businesses can get 225% tax relief on their research and development spending. In order to claim you will have to be able to demonstrate that your company carried out some work that will provide a technological advance to your company. If you’re a software company testing and adjusting your work in order to make sure that it’s fit for purpose and robust for use, then you are carrying out quantifiable research and development. HMRC will want to see evidence of your R&D on a project-by-project basis, but this is where specialised firms of R&D advisors can come in useful.

Changes to R&D tax credits

R&D tax credits were introduced to the UK in 2000, though the current changes apply to amendments to the 2009 corporation tax act. The legislation is being constantly updated and as a result of the recession criteria for eligibility were expanded in a bid to encourage greater innovation and investment. From 1st April 2015, according to HMRC, the allowance for R&D tax credits will increase from 10% to 11 %. In the government’s own words this change will ‘reduce the cost of R&D investment that companies make. Increasing the generosity of R&D tax credits is likely to increase aggregate R&D expenditure, which will benefit the economy more widely.’

Benefits for all

Innovation is sometimes viewed as a risk by some small businesses. The R&D incentive will encourage companies to sign upon to the Small or Medium Enterprise (SME) scheme; this includes those firms that employ less than 500 employees, according to HM Government the rules for the qualification for this tax credit haven’t changed, but if you are in any doubt whether you qualify, then seek the advice of the professionals. You may be pleasantly surprised to find that you are eligible and that R&D tax credits can reduce your overall tax bill.