With 2017 coming to a close it's time to step back and check exactly where we are. The good news is that word is continuing to get out about Research and Development Tax Credits. More claims are being made and the amounts are going up. What's not so great is that, even though more companies than ever have heard of the scheme, so many just don't understand that it applies to their work.
In some cases they're getting bad advice from “general practitioner” accountants who don't have specialist knowledge in R&D claims. In others, firms are simply falling for one of the widespread myths that RIFT is fighting so hard to kill off. Let's take a moment to knock out a few of most common, and damaging, false R&D beliefs out there:
Myth #1: if you're not wearing a white coat and holding a smoking test tube, you're not doing R&D
This is the big one. So many businesses never even look into R&D Tax Credits, simply because they aren't running high-end laboratories or re-writing the laws of physics. The truth is that R&D is about solving problems through innovation. Whatever business you're in, if you're finding new, better or cleaner ways to accomplish something, you're doing R&D. You don't even need to be inventing a new product, process or service. Even finding innovative uses for existing technologies can count. The scheme's aimed at expanding and improving what we know or can do in a scientific or technological field. If that sounds like your business, you could well have a claim.
Myth #2: claiming R&D Tax Credits means giving your secrets away for free
Making a claim for R&D Tax Relief does involve some HMRC paperwork. Like any other kind of tax relief, you've got to prove that you're owed money to claim it back. As part of that, you need to explain what you're trying to do and what problems you're solving along the way. However, the idea that you're giving your best ideas away to the competition or government is pretty much nonsense. There's no need to disclose confidential information to make your claim.
Myth #3: if your project fails, you can't claim for it
This is another tricky myth to wipe out. The truth is that your claim is still valid even if the projects it covers don't succeed. R&D Tax Credits do more than just pat you on the head when things work out. The point is to make the work you're putting into solving problems worthwhile in itself. HMRC's looking at the bigger picture with this scheme. The more companies in the UK are working on solving problems and making advances, the better. Sometimes, that work will pay off and sometimes it won't. Win or lose, every project is valuable because even failed experiments teach crucial lessons.
Myth #4: R&D claims are more hassle to make than they're worth
According to HMRC's latest figures, an average R&D Tax Credits claim for a small or medium-sized enterprise comes to £61,500. If that's not worth shuffling a few papers for, then we don't know what is!
Tax relief claims always involve paperwork. With R&D Tax Credits, you need to explain what your projects are setting out to accomplish and count up the costs. This is critical work, and it takes an expert eye and safe pair of hand to get it right. That's why RIFT are the UK's leading tax experts. Our specialists speak the same technical language as yours, and have the trust and respect of HMRC. RIFT will track down every qualifying cost and project, to make sure you never miss out.
R&D: the bottom line
The 2017 Autumn Budget was heavy on talk about innovation and embracing the future. The increase to 12% of the Research and Development Expenditure Scheme (RDEC) was a step toward proving that commitment. SMEs are probably (and understandably) feeling a little bit left out, though. One silver lining is the government's official statement that it would be campaigning to increase awareness of the scheme among smaller businesses. Responses have been mixed and occasionally loud, with some calling for an increase in the R&D Tax Credit rate for SMEs. Honestly, though, the longer and louder this conversation gets, the better things will be. It's the lack of noise around the scheme that means so few businesses get what they're entitled to from it.
To put it simply, ask yourself these basic questions about the work you're doing:
Have you heard of R&D Tax Credits but assumed that they don't apply to you?
Have you been told by an adviser that you don’t qualify? Did they say you were in the wrong industry? Did they offer this advice without a detailed understanding of your day-to-day activities?
Is your business working to improve what it does and how it does it? Are you determined to be more efficient, faster, greener or less costly than the competition? Are you working toward all this with an eye on maintaining quality?
Do you regularly have to tackle technical challenges through trial and error to complete your work?
Are you adapting existing technologies or techniques to get what you need from them at the right price?
If you're answering yes to questions like these, you could well be eligible for an R&D Tax Relief claim. There's no good reason to miss out on what really is the most valuable incentive scheme of its kind. Talk to RIFT and let us get you the credit you deserve.
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