… 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.
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…