Are you missing out on R&D tax credits?

For the year ending March 202, HMRC estimated that 85,900 startups claimed R&D tax credits. An annual increase of 16%, this figure highlights the great news that more and more startups are beginning to pay attention to this significant scheme.

And, with an average SME R&D tax credit claim of over £57,000, it’s now time to ask yourself, “can your startup afford to miss out on tax credits?”. Let’s help you find out.

Average R&D claim

With 76,225 businesses sharing £4.4 billion of tax relief, you’d think that R&D tax credits are the nation’s worst kept secret. But, despite this, many UK businesses are still not claiming for R&D relief. So, why? The biggest barrier preventing SMEs from making a claim is the confusing eligibility criteria.

Startups are usually frenetic workplaces, especially in the early days of a growth plan, with founders and business leaders often splitting time across many different priorities. So, finding the time to explore a complicated tax scheme can be difficult.

R&D tax credits are underused, underrated, and misunderstood. But when these tax incentives are used correctly, they can take your company to the next level. That’s why we’ve put together a comprehensive guide for you to make the most of R&D tax credits.

In this blog, we discuss some of the eligibility guidelines to help you understand whether you’re eligible or not.

Product development

Does your company develop or improve products? This could be the creation of an entirely new product, service, or production process. If this activity has occurred in the last year, it might qualify as an R&D research project.

Do you employ skilled professionals?

HMRC requires that a skilled and competent professional oversee your research and development activities. This is because the presence of a competent professional indicates that any ‘advance’ has been challenging to achieve, and therefore worthy of state tax relief.

Suitable professionals include:

• Engineers

• Scientists

• Developers

• Other highly skilled workers

Do you face scientific or technological challenges?

To be eligible for R&D tax credits, the scientific or technological advance your startup is pursuing should be challenging. Accordingly, HMRC wants to see that your project encountered a ‘scientific or technological uncertainty'.

Indicators of scientific or technological challenge might include:

• A solution to your ‘challenge’ is not readily available.

• A skilled professional, working in your industry, cannot easily solve it.

Which costs qualify for R&D tax credits?

Simply put, your startup must have incurred costs on qualifying items for any tax credit claim.

Typical qualifying costs include:

• Staffing costs

• Prototype costs

• Research costs

• Software licence fees

• Volunteer costs for research, such as in clinical trials

In summary

There are huge benefits from claiming R&D Tax Credits. One of them is the average R&D claim of over £57,000! Completing this process effectively can be transformative to your business. Not only does it unlock cash for your company to reinvest, but it also provides the UK with a pool of innovation that has a positive impact on the wider economy.

Hi, we’re Accountancy Cloud

If your company is looking to take advantage of R&D Tax Credits, we’re here to help. At Accountancy Cloud, we give founders the freedom to focus on what they love and make smarter decisions through our market leading industry experts gaining access to cash or reducing tax bills.

Through our motivated and personalised service, we can help you achieve all of your business goals. Talk to us today to see how we can help you.