There are numerous reasons why organisations are still not taking advantage of R&D tax relief in the UK. However, the most common cause is that they do not necessarily realise that the scheme could apply to their own activities. The phrases ‘R&D’ and ‘innovation’ often conjure up images of blue-sky thinking and men in white coats. What many do not realise is that the definition of R&D for tax purposes actually extends far beyond the laboratory.
What does R&D for tax purposes actually mean?
The extent of qualifying activities under the R&D tax relief scheme frequently surprises directors and accountants alike. Despite the UK R&D tax scheme having been around since 2000, there are many organisations still overlooking expenditure on day-to-day business challenges, which could in fact be eligible.
It’s worth noting that the legislation itself is very broad and is designed to be applicable to all industries. For instance, one of our clients, a leading specialist for complex new builds and temporary works solutions in the construction industry, has recently claimed a tax benefit of almost £700,000. For this organisation, with a turnover of around £50m, they were amazed to find they had a total qualifying R&D expenditure of over £3.5m for just a two-year period. Their qualifying expenditure originated not from any abstract thinking in an R&D lab but in finding solutions for the real challenges they faced whilst completing business contracts.
What’s the benefit?
The figures speak for themselves. Your business could also be claiming a significant tax benefit, which could have a genuine, tangible impact on your operations. As an SME, this amounts to between 26p and 33p per £1 of qualifying expenditure, depending on your tax position. Meanwhile large companies could receive a tax benefit of up to 8.8p for every £1 spent. These benefits could be received as either a reduction in payable corporation tax or a cash credit if your organisation is making a loss.
Over the last few years there have been a number of revisions to the R&D schemes, including amendments to eligibility criteria and increasing the generosity of the available incentives. However, the downside to these various changes is that the level of complexity of compiling an accurate claim has also increased. Here at Alma CG, our core focus in the UK is innovation funding. Every day we work hard to take the pain out of claiming R&D tax relief for our clients, providing them with the processes, knowledge and experience to maximise their claims efficiently and cost-effectively.
Could we be claiming more?
Even if your business has already been taking advantage of R&D tax relief, it shouldn’t be assumed that there isn’t more you could be claiming. We often encounter clients who have previously submitted claims through an in-house team, an accountant or an advisory firm but have inadvertently omitted less obvious areas of eligible expenditure within their claim. This means that they could be able to claim additional relief and, in many cases, we have successfully increased these claims generating uplifts between 30% and 300%.
One of our favourite examples is when we started working with a rapidly growing ink manufacturer; their external accounting team had already submitted an R&D claim, identifying £15,000 of qualifying expenditure. After conducting interviews with technical staff, we found an additional £92,000 of eligible costs – an increase of over 600% – which created an additional tax benefit of £22,000 for their business. This is a great example of how thoroughly investigating your R&D tax relief eligibility can result in significant rewards.
My message to you is simple: you must act now. Whatever your businesses’ activities, you could be eligible for additional tax relief. By working together with an R&D tax expert, you can optimise your claims by relying on our in-depth and up-to-date understanding of this complex legislation. So what are you waiting for: why would you not want to secure a cash injection or reduction in payable corporation tax for your business?
If you’re interested in finding out whether your business could be claiming R&D tax relief, or could be claiming more, Alma Consulting Group is offering Elite Business readers a free no-obligation consultation and preferential rates on their success fees. We operate on a success fee basis so we only get paid once you have been, meaning there’s absolutely no up-front cost or risk for you. Call today on 020 30 58 58 00 or leave us your details here and we’ll be in touch.