R&D Tax Credits… they want YOU to claim them

… and you don’t need a white coat… or an R&D department

Research & Development tax credits are the Government’s way of encouraging companies to develop new products and services…

Any company that spends money trying to improve a product or service or even a process through a technological advance where there’s doubt about the project’s success is likely to be eligible.

Is that you?

There’s a real good chance it is, and frankly HMRC are desperate for SMEs like you to claim the tax relief, regardless of the sector you operate in.


Some research suggests the largest number of claimants are in construction, and not high tech companies as you might expect.

I personally know of landscape gardners, web companies and very small manufacturers who have been successful in getting actual cash back from the tax man… and they did it all themselves.

How’s it work?

If you’ve spent money on R&D costs such as wages, raw materials & software then you can deduct up to 225% of these costs from your taxable profits. You can go back up to 3 years, and if that means you’ve overpaid tax then HMRC will send you a cheque.

And they send that cheque real quick.

Who does the claiming
Your accountant should be able to do it for you… but often they won’t, and frankly some don’t know how.

‘It’s not for companies in your sector’
‘It’ll mean masses more paperwork’
‘You have to produce a huge technical report.’
‘It will probably spark a tax investigation from HMRC’

Just some of the things accountants have told companies I know… so I told those companies to call HMRC directly and do it themselves… and they were all successful in getting the reliefs… without their accountant’s help… or fees.

A word on consultants & what will they cost?

There are some very good ‘no gain, no pain’ consultancy firms who will help you claim the tax relief. That means no payment unless they get you some tax money back.

Personally I know Terry Toms at RandDtax.co.uk… and they do a great job… taking 18% of the money recovered

There are others (eg Jumpstart ) and terms differ so it’s worth checking just what you’ll be paying out if successful (& for how long… I’ve heard of one that takes a cut for the next 4 years too… which is a touch too generous!)

Your first Claim

Have a poke around the HMRC website. See if you roughly match the basic criteria. Then give them a call. They really are very friendly and helpful … at least when it comes to R&D tax reliefs!

HMRC’s eligibility criteria can look daunting (there are links below)… but it’s not

Try asking yourself these questions :

Technology : Does my company attempt to develop new technology, with no guarantee of success?

Improvement : Does my company try to make objective, measurable, and significant improvements to the design and implementation of its products, services or processes?

Problem solving  : Does my company use appropriately qualified or experienced internal staff to solve a challenging technical problem (although you can use sub-contractor for parts of the project)?


Here’s the way HMRC frame those questions… this is an email from an HMRC R&D tax relief officer…
1 What is the scientific or technological advance?
Rather than stating the name of the product, process, functionality, etc, being developed you should consider what scientific or technological advance is being sought. This focuses attention on the project’s aim for an advance, which is the key issue in judging whether R&D for tax purposes is being undertaken.
Science does not include work in the arts, humanities and social sciences (including economics).
It’s not enough that a product is commercially innovative. You can’t claim in respect of projects to develop innovative business products or services that don’t incorporate any advance in science or technology.
2 What were the scientific or technological uncertainties involved in the project?
Scientific or technological uncertainty exists when knowledge of whether something is scientifically possible or technologically feasible, or how to achieve it in practice, is not readily available or deducible by a competent professional working in the field.
But uncertainties that can be resolved through relatively brief discussions with peers are routine uncertainties rather than technological uncertainties. Technical problems that have been overcome in previous projects on similar systems are not likely to be technological uncertainties.
You should set out at a high level, in a form understandable to the non-expert, what these uncertainties were and when they started and ended.
3 How and when were the uncertainties actually overcome?
Describe the methods adopted to overcome the uncertainties and the investigations and analysis undertaken. This should not be in great detail, simply sufficient to show that the matter was not straightforward. Describe the successes and failures and the impact of these on the overall project. If the uncertainties were not overcome, explain what happened.
4 Why was the knowledge being sought not readily deducible by a competent professional?
It might be publicly known that others have attempted to resolve the uncertainties and failed, or perhaps that others have resolved the uncertainties but that precisely how it was done is not in the public domain. In either case a valid technological uncertainty can still exist.
Alternatively, if the project is one where there is little public information available, you’ll need to show that the persons leading the R&D project are themselves competent professionals working in the relevant field. This might be done by outlining their relevant background, professional qualifications and recent experience. Then have them explain why they consider the uncertainties are scientific or technological uncertainties rather than routine uncertainties.
Whichever is appropriate set out the details and have evidence available if needed.

 

 

If you pay it … flaunt it…

If you pay the Living Wage why not get the credit… and get accredited
Outside of London the Living Wage is set at £7.65 per hour

The Living Wage Foundation will accredit any employer paying it to their staff and contractors

The Federation of Small Business (FSB) reckon 49% of small businesses already pay at least the Living Wage

So why are so few of you bothering to get accredited when most of you “can be accredited straight away” … ?

I’ve pasted below some of the reasons to go for it given by the campaign… but for me you get recognition for doing the right thing…

And it seems that might not be a bad idea as the campaign spreads…

eg here in Greater Manchester 8 out of 10 local authorities are committed to becoming accredited Living Wage Employers (with only one being fully accredited so far)… and that means they’ll be pushing the Living Wage throughout their supply chain…

… plus accredited employers report some interesting stats (they’re always interesting)… including, 70% of employers feel accreditation has increased awareness of their ethical credentials

.

So why not take a look…

Sources :

Living Wage Foundation

A Guide for Employers

FSB

Benefits (from the Foundation’s website)

You are entitled to use the Living Wage Employer mark.

You receive Living Wage merchandise including a mug, tote bag, pen and badge.

You can claim your Living Wage Employer plaque.

You appear on our website, which we are developing into a searchable tool so that consumers, prospective employees, students and grant makers can easily see who pays the Living Wage.

You become part of a strategic network of employers that support and promote the Living Wage.

You have the opportunity to work with us on press coverage to promote your accreditation.

You will receive an invitation to events during Living Wage Week.

You will receive a Living Wage Week pack with materials and guidance on how to be part of the national celebrations.

Grant funding for innovation … the SME Instrument

So… the first round of SME grants have been awarded… worth the hassle?

The SME Instrument offers a 50,000 Euro cash grant for a feasibility study into an innovative project.

It has 4 application deadlines in the year… and 26 UK projects were awarded the grant in the June round…

Good news for them… 50,000 Euros in cash… almost no strings (and the 30% ‘funding’ the company themselves has to chuck in can be ‘in kind’ = their time..). They also get themselves onto the inside track for further (much chunkier) funding opportunities as the project develops.

Good news for the UK too… only Spain had more successful applications

Problem is… there were 232 applications from the UK… for just 26 successes… a 90% fail rate

That’s alot of effort and energy for nothing…

… so what’s to be done?

The EU themselves say : “The applications process is easy but only the very best projects can expect to receive funding”

So how do you be the best..?

Well… you can be the best… or be the best prepared… ?

Do the standard stuff … read all about the instrument… read the FAQs… then…
Do the right stuff… get on the phone to your regional Enterprise Europe Network … they have people who really are waiting to help the UK get a better result than a ‘90% fail’… and they know how the Euro funding game is played…

You can get other people on your side too… there are grant getters in the space like Pera… but I’m told the application process really is easy (certainly compared to previous Euro grants) … and if they knock you back… you get to pick yourself up and go again…

Overall though… a 90% fail rate isn’t really acceptable… it’s slightly outrageous that government schemes are wasting so much time of so many busy applicants… the very people they’re supposed to help… (if bankers turned down 90% of SME funding applications there’d be uproar… & rightly so)

The application deadline for the next Phase 1 round is 24th September 2014…

Sources:
EU press machine
EASME (Executive Agency for SMEs)
FAQs : SME Instrument

Here’s a quick cut & paste …. Feasibility assessment (phase 1)

Funding is available for: exploring and assessing the technical feasibility and commercial potential of a breakthrough innovation that a company wants to exploit and commercialize.

Activities funded could be: risk assessment, design or market studies, intellectual property exploration; the ultimate goal is to put a new product, service or process in the market, possibly through an innovative application of existing technologies, methodologies, or business processes.

The project should be aligned to the business strategy, helping internal growth or targeting a transnational business opportunity.

Amount of funding: lump sum of €50,000 (per project, not per participating business).

Duration: typically around 6 months

Outcome: The outcome of a phase 1 project is a feasibility study (technical and commercial), including a business plan.

Should the conclusion of the study be that the innovative concept has the potential to be developed to the level of investment readiness/market maturity, but requires additional funding in view of commercialisation, the SME can apply for Phase 2 support.

 

Are you a Permanent Non-Borrower?… you’re not alone…

A third wouldn’t borrow money – even if they were paid to ?

 Owner Managed Businesses (SMEs) are becoming increasingly self sufficient and shunning all forms of borrowing…

31% are now classified as Permanent Non-Borrowers (PNBs)… the highest level to date and up from 20% in Q1 of 2012…
That’s a problem for the Bankers et al who finance SMEs because roughly a third of SMEs have had no ‘borrowing event’ in the last 5 years, and don’t plan to have one in the future either…

And it’s a problem for Westminster too… keen to squeeze finance into SMEs to ramp up growth into the next election cycle.

But it’s also a problem for guys like me… bred on the Anglo raw meat ‘debt is good’ diet…
So what’s going on? Why won’t an increasing number of you borrow?
Well it’s not really the economy that’s putting SMEs off…
Those citing the Economy as a barrier to their business are down to 16% from 33% in Q1 2012
And it’s not the availability of debt…
Those citing Access to Finance as a barrier are down to 9% from 15%

And it’s not that they don’t expect to grow…

In fact 68% of SMEs with 10 to 49 employees do (up from 56% in Q1 2012)…

and 57% of those employing 1 to 9 people (v 51%)

So… is it :
profits are up and being retained thus reducing the need for external funding?
the bunker mentality of the recession years is proving hard to shake off?
the numerous finance scandals (global & local) have shaken already shakey trust?
the pace of expected growth is too slow to warrant any major funding change?
traditional funding processes are too demanding, too slow, too painful?
as businesses recover is there less need for non-growth / emergency related funding?
are you avoiding anachronistic Personal Guarantees?
or are you all too busy playing the property / buy-to-let boom & would rather borrow privately for that than borrow to invest in your trading companies?
I don’t know…
I do know that there is a lack of awareness out there about all the weird & wonderful new forms of finance popping up…
Take an alternative funding source that is now going mainstream… peer to peer crowd funding (Funding Circle, Rebuilding Society)… only 17% had heard of it… yet given the flexibility, speed & all round user-friendliness of these funders I can’ t help but think that if that number were higher… the number of Permanent Non-Borrowers may well be lower.
Data sourced from SME Monitor