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Top ten tips for claiming R&D tax relief

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(1) Making an R&D claim can be well worth the effort

For every 100 of qualifying R&D expenditure relief is available at 26.00 and 33.35 for profit-making and loss-making SMEs respectively. 

(2) But we dont wear lab coats  

The government applies a much wider definition of R&D than is often initially thought. What qualifies as R&D for tax purposes is almost always broader than a company would see as its pure R&D. Any company in any sector could be eligible to claim if investing in or developing technological capabilities.

(3) Whats in a name  

An “SME” for R&D purposes is broadly a group with less than 500 employees and 100m turnover globally. Remember this definition isnt necessarily the same as that used by other government agencies or HMRC for other purposes.

(4) Track your investments and investors

When considering if you’re an SME for R&D purposes you need to include any proportion of the results of any company that has a shareholding of 25 per cent or more in your company and/or any company you hold a 25 per cent share in. 

(5) It may be challenging to find the funds to pay directors for their time…

… but if theres no payments then the value of their time can be lost, so it’s worth considering whether this investment can be reflected in the financials.

Read more about R&D tax:

(6) Watch out for grants! 

Believe it or not, you can be significantly better off claiming R&D tax relief. Grants can come in many forms (capital grants, revenue grants, notified state aid, etc.) and all can have adverse impacts on your R&D claim.

(7) The claiming window may still be open

You have two years after the end of the relevant accounting period to make a claim, which means you can still claim now for prior periods.

(8) But dont rush it

R&D claims impact the tax paid by your company, group companies and joint ventures in the current period, prior period and future periods, so ensure you get a clear picture of the implications of using R&D reliefs.

(9) Make sure you have adequate records

While theres no specific record keeping requirement for R&D tax relief claims per se, there is a general HMRC requirement to keep sufficient records to support the claim. Its good practice to maintain records of technological advances sought and to help identify eligibility.

(10) Dont be intimidated by the claims process

The government is actively encouraging SMEs to make R&D tax relief claims ? so dont let the thought of making a claim put you off and remember that there is no minimum level of qualifying R&D costs required. 

Furthermore, Brian Williamson suggests that tax credits can help boost cashflow among innovative SMEs.

Samantha Day is a tax partner at KPMG Enterprise.

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