R&D Tax credits are a form of tax relief for businesses doing innovation things, but many don’t know that they are eligible. A.K. Hajee, director of technical services for RDP Associates, tells BQ about the process.
Over the last several years, the research and development (R&D) tax credit programme has gained popularity and the number of claim submissions continues to increase year on year.
The programme is specifically designed for high-growth small and medium-sized companies, as well as those who have incurred significant costs by investing heavily in developing new, or significantly improving existing, technology, techniques, formulas, software, and services.
The programme was developed to encourage greater R&D spending, with the goal of increasing innovation within the economy.
These credits work by reducing a company’s tax bill by an amount equal to a percentage of its allowable R&D expenditure, meaning they aren’t penalized for investing.
Primary Reasons Why Companies are not Presently Claiming R&D Tax Credits
While the results of the programme have been positive, there are many businesses that are still not taking advantage of it, primarily due to one of the following four reasons:
· Concerns about HMRC
· Limited company resources
· Concerns about eligibility
For now, let us explore point four in further detail, which I would like to divide into three groups.
There are those that still do not know about the programme’s existence and will therefore make no claims.
Those who know of it but believe it is a “scam”, whereby getting cash back and/or tax benefits from the tax man is unheard of.
And those who know about the programme and have considered claiming, but have chosen not to do so for whatever reason.
The 6Ps of R&D Tax Credit Eligibility
If you are in any of the three groups above, I simply request that you consider what we at RDP Associates call the “6 P’s of Eligibility”.
They are as follows:
Does your company develop new or improved Products?
Does your company develop new or improved Processes?
Does your company develop Prototypes?
Does your company employ technical Professionals (engineers, software and app developers)?
Does your company file, or has been issued Patents?
Does your company encounter design or development Problems?
If you can answer ‘yes” to one or more of the above 6 Ps, it is likely that your company is eligible to claim for R&D tax credits.
Is my industry eligible?
Still not convinced? RDP has assisted clients spread across 15 different industries. We have included various examples of R&D eligible activities broken down by key industries:
Conducting requirements, domain, software elements, or scope analysis for a new functional software enhancement
Designing and developing the structural software architecture
Establishing electronic interfaces and functional relationships between various software modules
Programming software source code
Conducting unit, integration, functional, performance, and regression testing
Determining alternate materials with which to construct a structure, or parts of a structure (must be a new concept to the taxpayer)
Determining alternate means of assembling and/or fastening component parts of a structure (must be a new concept to the taxpayer)
Developing processes or equipment for the extraction of natural elements from another substance, or the development of processes and equipment to convert the extracted materials
Integrating product and material transportation systems into the functional design of the structure
Toxic waste and other waste disposal processes integrated into the structure
Developing unique energy efficient features
Developing schematic designs
Designing a functional site plan to incorporate or overcome the site plan features
Designing and developing building facades
Designing building systems
Food and Consumer Packaged Goods:
Developing recipe formulations for new food products and flavourings
Improving existing food product formulations to enhance sensory qualities including flavour, appearance, and texture. Improving existing food product formulations to achieve specified nutritional requirements, including sodium content and caloric value
Developing new packaging designs to provide enhanced functionality or increased product shelf life
Testing prototype samples for analytical and microbiological qualities
Developing new production process specifications and techniques for the production of new food products, including mixing times, batching sequences, and cooking temperatures and durations
Tooling and equipment fixture design and development
Developing unique computer numerical control programs
Prototyping and three-dimensional solid modelling
Designing, constructing, and testing product prototypes
Increasing manufacturing capabilities and production capacities
For a complimentary assessment of your eligibility for R&D tax credits, contact A.K. Hajee at (0) 203 002 0089, or email him at email@example.com
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