March year-end? Don’t miss out on a valuable cash boost

If your accounting year-end is 31 March, you need to read this. If you are an innovative business, this is your deadline for claiming an R&D tax credit for your 2015/16 accounting period.

Don’t think you are innovative enough? Many companies are surprised to learn that they qualify for this valuable source of funding. So it always pays to check.

What are R&D tax credits worth? Well, according to HMRC who administer the claims, the average R&D tax credit value to SMEs is £61,314. That’s cash that could spark the next big project, or fund the final push in creating something remarkable.

Why do you need to act now?

You have two years from the end of your accounting period to submit an R&D tax credit claim for qualifying expenditure you've incurred in that period. So once you hit the deadline at midnight on 31 March 2018, you can no longer recoup any of the money spent on qualifying activities between 1 April 2015 and 31 March 2016.

If you have already made a claim for this period but want to be sure you haven’t missed out on any untapped value, this same deadline applies for reviewing a claim too.

How do R&D Tax Credits work?

R&D tax credits are a government tax incentive designed to encourage innovation in the UK. The government rewards limited companies that are innovating because it knows that doing so brings significant benefits to the wider UK economy.

As a tax incentive, R&D tax credits are only available to companies that are liable to Corporation Tax.

You also have to be undertaking R&D, and have spent money on it. If you have developed new or improved products, processes, or services, you may be carrying out qualifying activity. Examples of R&D include:

  • Developing a new lighter-weight material to improve efficiency
  • Using AI and machine learning to develop chatbots
  • Building a bespoke e-commerce platform
  • Developing a new lighter-weight material to improve efficiency
  • Designing a new method to manufacture an existing product with less waste
  • Creating a new coating for fabric to withstand high temperatures

What are R&D Tax Credits worth?

How much R&D tax credits are worth depends on how much money you have spent on qualifying R&D activity. You can include the following costs in your claim: staff, subcontractors, materials, and consumables (such as heat, light and power).

SMEs are able to recoup up to 33p for every pound spent on qualifying expenditure using the SME R&D tax credit scheme. This means if you have qualifying costs of £500,000, you could receive a benefit worth £166,750.

Large companies can recoup almost 10p for every pound spent using RDEC (research and development expenditure credit). This means if you have qualifying costs of £1,000,000, you could receive a benefit worth £97,200.

Don’t let your grant funding stop you

There is a misconception that the receipt of a government grant prevents you from claiming R&D tax credits. This is not true.

Instead, we would suggest that if you are grant-funded, you should certainly consider claiming R&D tax credits. How much your R&D tax credit is worth will depend on the nature of your grant – and whether you are able to make an SME, RDEC, or hybrid claim.

How to claim and beat your 31 March deadline

It’s best to work with true experts in this specialist area when submitting a claim. They will optimise the value of your claim. This means including everything that is valid, whilst also ensuring it can be robustly backed up should HMRC challenge it.

We can arrange for a team of chartered tax advisers – complemented by industry experts and former HMRC R&D unit tax inspectors – to handle your claim. They will gather information from the relevant people in your business, prepare all the paperwork and liaise with HMRC on your behalf.

For a free eligibility assessment or review of a claim you have already submitted, get in touch with us at info@exelin.co.uk or speak to one of the team on 0845 608 3838.