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Business Insights

External funding is the lifeblood of many businesses, fuelling them and enabling them to grow and to fulfil their founder’s vision.

Tax credits for research and development activities have become a major component of such funding, giving businesses at many stages in their development the means to achieve success, and convert that into prosperity for communities nationwide.

Yet, says Maxime Kryvian, Director of R&D claims specialist firm R&D Expert, this pipeline is still not being exploited to its full potential by busy SMEs, whose managers are often unclear about what constitutes research and development, and are reluctant to claim for fear of encountering a wall of arcane regulations and exemptions.

“Instead of focusing on obstacles in the claims process we look closely at the project work done, so we can honestly and accurately appraise your chances of making a successful claim.”

Many generalist accountants lack specialist knowledge of the claims process, which can leave a huge amount of work for the claimant to do. This, and lack of knowledge is one of the main reasons for businesses not claiming. R&D tax credits is a specialist field and many accountants still don’t thoroughly understand key areas of project eligibility, whilst other firms leave much of their work with the client – so clients will not have fully benefitted from their specialist expertise.

Assessing whether your business might qualify for the relief is important to its chances of success – and that’s where an expert in R&D can help.

It’s a common misconception, but R&D is far from being all about lab coats and robots, but is defined as any process or project which innovates, develops, refines or adds value to a process, product, device, material or service.

It is a deliberately broad definition, because research takes place in all kinds of surroundings, and for myriad reasons, but if it meets at least one of key criteria, then your business is likely to be able to benefit from the time and money spent, including on labour and testing.

Those key tests are:

Has your business developed a web platform, custom software or mobile app?

Has it worked to improve an existing product or process?

Has it made any scientific or technological advances?

Has it applied for any patents?

Of course, innovation comes in many guises and leads to improvements which are physical and tangible (e.g. An enhancement in the way a business works which was not already addressed by already available products or processes).

If your company is profit-making, the potential benefits could amount to an offsetting of up to 26% of its liability for corporation tax. Or if the business made a loss in the year being assessed, it can have the money paid in cash (up to 33.35% of qualifying expenditure).

You can submit a claim for up to two financial accounting years in arrears, and then in each subsequent financial year, so if you are in a competitive sector which depends on an ongoing programme of innovation, R&D tax credits could be a vital means of ensuring that work can continue.