The simple truth about R&D tax credit and how to claim it

Author - Arlen Pettitt

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Nicola Bellerby is a Tax Partner at Clive Owen and will be speaking at a Chamber Knowledge webinar on 16 June 2021, 10am – the simple truth about R&D tax credit and how to claim it.

I have worked at Clive Owen for 25 years now and have been preparing R&D claims since the introduction of the scheme in 2000. In the last 3 years alone, we have saved our clients over £12m in tax.

It’s something I am passionate about as it is such a valuable benefit, particularly at a time when many companies are struggling financially with COVID and with Brexit causing such uncertainty, it makes sense to explore all avenues of financial support.

I find that many companies do not apply for R&D tax credits for a couple of reasons, the first one being that they often feel that their company is too small to make it worthwhile.

In fact, R&D tax relief is a funding mechanism for innovative businesses of any size and there is a scheme specifically designed for small and medium-sized businesses.

R&D SME scheme.

You may qualify for the SME scheme if you are carrying out innovative projects and:
• are a limited company based in the UK
• have been trading for at least a year
• employ less than 500 people
• have turnover which is less than £85 million a year

The Research and Development Expenditure Credit (RDEC) scheme is designed to provide large companies an above the line credit.
However, it’s worth remembering that It is not really about the size of your company or its turnover – it’s the amount you spend on innovation that is key.

Considering your R&D expenses.

Another concern I hear from businesses it that they feel they spend so little on research and development that a claim would not be cost effective.

In fact, R&D costs on a project should include all qualifying associated expenses and these can include;

  • Staff costs
  • Externally provided workers and sub-contractors
  • Software
  • Utility costs
  • Consumable items used up in the R&D process

It’s worth noting that most claims made are below £50,000, which clearly demonstrates that the scheme is there to support companies of all sizes.

Don’t be put off.

I also believe a lot of businesses think that because they are making a loss and therefore are not paying corporation tax anyway, they can’t apply.

It’s always worthwhile considering future relief, especially because you can take this relief as a cash payment now whether you’re in profit or loss or you can carry forward the loss and save tax in future when you are profit-making.

So, even if you have never paid corporation tax or have yet to make a profit, you can still get cash payments when you need them most. Why miss out?

And finally, 75% of claims received by HMRC are settled within 28 working days, so the process is not usually protracted and if it’s appropriate, you can even make a claim year after year.

From my experience the relief is misunderstood and overlooked, and I would love more or our resourceful, resilient, and dynamic businesses across the North East to benefit. It really is the scheme that keeps on giving and now you know how easy it is to apply, I hope you will investigate further.

Nicola Bellerby, Tax Partner, Clive Owen

CliveOwen.com

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To register for the Knowledge webinar featuring Nicola, please visit our Eventbrite page.

Photo by Kelly Sikkema on Unsplash

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