The HM Revenue & Customs or HMRC has made it easy for a large company to avail tax relief from their research and development expenditure.
By applying for a tax credit relief, you can improve your business cashflow, reduce your tax rate and lessen your income tax expenses. This might just be the perfect solution for your business.
Things that can help you qualify for an R&D tax relief
Not a lot of business owners know that they can apply for R&D tax relief. Despite the efforts of the UK government to encourage technical innovation in businesses, only 19% percent classify their business as innovation active and file for an R&D tax incentive.
If your business belongs to the technology and science industry, you should try applying for a R&D tax credit privilege. To start, you need to ensure that your business meets the following criteria:
Developing products improved by technology
If you manufacture products and you constantly innovate your production process by conducting research and product testings, you may qualify for an R&D tax relief. It doesn’t matter if you succeed or fail in your product improvement. You can still claim a tax credit by submitting the necessary paperwork.You can take inspiration from Bee Lighting, a company that specialises in creating lighting products for vehicles. At Bee Lighting, they continuously innovate their design and engineering process to create products that meet the needs and demands of their clients.
Improve current systems to maximise the efficiency of production and performance
It’s important for any business to improve production efficiency and performance. Without increasing capacity and efficiency, your business might not reach its full potential, or worse, fail to supply the demands of the customer.At Brainomix, a leading imaging software company that specialises in diagnosing cerebrovascular and neurological diseases. They discovered how a lack of timely scan readings can deter patients from getting proper medical attention. By working on the available programs, they were able to create a more advanced system that can help save more stroke patients.
Building new software or systems to provide better services
If the business your currently operating requires you to create a software to upgrade the service or product that you provide, you should also make a claim for your R&D tax relief.
A perfect example of a company that has been using systems and software to provide more value to their customers is Logistex. They have partnered with Pharmacy2U to create an n automated system that can receive, pack and deliver prescribed and OTC drugs at an amazing rate of 600 orders per hour. If your company is doing something similar or if you want to build a program that can upgrade your customer’s experience, you can apply for the R&D tax incentive.
Developing specialised solutions to solve a certain client problem
Sometimes, clients demand a bespoke solution. Not a lot of company can provide customised solutions to clients because it will entail a lot of work and effort from the R&D team. However, if you want to take advantage of the research and development tax credit, you might want to consider providing bespoke products and services to your customers as well.
A company that creates scaffolding systems for large commercial construction projects all over the country is the best example for this situation. Their company strongly believes in creating unique scaffolding systems to offer new and better solutions. Like many other businesses, they continue to improve their products and services so they also receive an R&D tax relief.
What are the requirements to qualify for an R&D tax incentive?
Most companies think that they only need to submit a ledger account that says “research expenses” to submit a proper R&D tax documentation.
Moreover, some companies often fail to correlate their qualified research activities or QRAs with their qualified research expenses or QREs. Listing the money spent on research purposes won’t be enough to trace specific activities or project.
Here are the key tips you need to remember when you’re compiling your tax documentation for your company’s R&D.
- You need to provide the company’s financial information such as the wages of the employees involved in the R&D project.
- List the R&D activities plus the date they were performed.
- Gather the work plans, minutes of the meeting, payroll records and other documentation.
- Attach blueprints, progress reports, CAD reports plus change orders. You should also include the testing documentation. It should describe the marketing materials used and the flaws or strengths.
Take advantage of the government provided an R&D tax benefit. It can help you in so many ways. With proper documentation, you can benefit from keeping your company relevant in terms of R&D, getting funding for your company’s much-needed innovation projects and offering more value to your beloved customers.