Could Your Business Claim R&D Tax Credits?

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Despite Research and Development (R&D) tax credits legislation having been around for a number of years, many eligible business are still unaware of the tax savings on offer. Significant corporation tax savings or cash repayable credits from H M Revenue and Customs can be claimed on certain activities such as making bespoke products, product development or changes to manufacturing techniques.

Tom Wilkinson is Associate Director at Lancashire-based accountancy firm Pierce and an expert on R&D tax credit legislation. After providing assistance to a number of FBX Solutions’ clients on the matter, he said ‘’It is staggering how many eligible businesses there are out there who are not making a claim for R&D tax credits. Part of this is due to poor or non-existent professional advice, but a key factor is that of the awareness of the legislation which is much broader than many realise. I was speaking to a senior tax barrister just before the Christmas break who says HMRC believe some 87% of eligible businesses for R&D are not making a claim!’’ The R&D tax credits system means that companies can claim 230% tax relief on qualifying expenditure, rather than a standard 100% relief. Such expenditure includes materials consumed in R&D and staffing time expended on R&D as well as software, consultancy and utilities costs incurred on qualifying activities.

Tom added ‘Some people have suggested this is a sort of tax-avoidance scheme, which is not the case at all, in fact HMRC are encouraging the legislation and there are some 60 equivalent schemes worldwide. The legislation is there to encourage growth and innovation in the UK. Some of the types of companies I have done claims for include all sorts of manufacturing companies, engineering, food and drink, technological and even construction. Whilst many businesses qualifying activities can be clearly evident, it is surprising how many businesses are undertaking tax-qualifying R&D work without realising it. I recall last year going to see a client about a completely separate matter, a business restructure project, when we started discussing activities on the shop floor and it was evident some of the work being undertaken was R&D qualifying and a subsequent claim was successfully made.”

Anyone interested in finding out more can call Tom Wilkinson on 01254 688100 or email at t.wilkinson@pierce.co.uk. Alternatively, please use the ‘Contact Us’ page on this website for more information.