It is common for businesses to think of research and development (R&D) to be something that is only carried out by specialist science labs and large corporations. And this can lead to them imagining that R&D tax credits are not something that could possibly apply to them. However, it is important to understand that these are misconceptions.
Businesses of all sizes can carry out R&D work – it is just a problem that many people don’t know what qualifies as R&D, or how they might go about making a claim. So here we take a closer look at R&D tax credits and examine some of the situations in which you might be able to claim them. It could be the case that you are missing out on a significant amount of tax relief for your current projects.
Here are some of the signs that your business might qualify for R&D tax relief.
You are an SME
Small and medium sized businesses (SMEs) are sometimes the most likely to miss out of forms of tax relief, because they may lack the accounting expertise to make the most of them. However, the R&D tax relief scheme was specifically designed for SMEs – defined in this case as companies with fewer than 500 staff and a turnover of under €100m.
Larger companies can get tax relief on R&D activities too, but under the R&D expenditure credit banner. But it is just quite ironic that many SMEs don’t realise they can claim on the R&D tax scheme even though it is specifically designed for them.
You’re trying to solve a problem
Even though many assume that their company needs to be scientific or advanced, however, this is not the case. You do need to be looking for ways you can improve what you are doing, and experimenting and researching ways that you can do this. But these activities do not need to be limited to a specific area.
You can claim R&D tax credits across a wide variety of industries. If you create products then it likely that you will be engaging in work that falls under the category of R&D. This could involve creating new products, or improving existing products. It may be in the production process itself, or even in distribution.
As long as there is a problem, and you are trying to solve it – you may qualify for the R&D tax credit scheme.
You are looking to advance the field as a whole
To qualify for R&D tax credits it is important that your project is aiming to advanced knowledge in the field as a whole, rather than simply as a way to benefit your business alone. For example, it would not qualify for R&D tax credit if you were just utilising an existing technology for the first time in your industry.
If your advance can be used by others, then you may qualify for tax credits. This is because the government is intending to incentivise things that the general public can use.
You are doing work others can’t
Another factor in qualifying for R&D tax credits is in showing that the work that you have carried out is not something that can be easily achieved by others. There can be many ways to do this, but one of the most effective is in being able to show that others in your field have attempted to find a solution to the problem.
It is worth noting here that being successful is not a condition of receiving R&D tax credits – you only need to show that you have attempted to find a solution.
You can show that the problem is real
To be able to claim tax relief, it is important to be able to show that there is a problem or uncertainty that you are trying to deal with. You cannot get tax relief for simple exploratory work in the hope that some positive is developed. Additionally, it means that your business cannot already have knowledge of the solution to be able to claim tax relief for it.
If you know the problem that you are trying to solve and can show how it has encumbered others, this can be a strong sign that you can get tax relief for it.
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