Since its inception in 2000, Research and Development (R&D) Tax Credits have offered significant financial incentives for ambitious, innovative businesses looking to push the boundaries of what’s possible in their respective sectors.
Despite its availability, the UK sits well behind many of its European neighbours when it comes to total R&D spending, equating to only 1.1% of the GDP compared with over 3% in the likes of Germany, Austria, Sweden, and Denmark. It gets even worse when you consider that the South Koreans (4.22%), the Japanese (3.28%), and the Americans (2.76%) are also spending far bigger numbers.
If the UK wants to make its mark on the world stage in the post-Brexit era, the government must encourage businesses of all shapes and sizes to innovate or risk the economy falling further behind when the nation needs it to thrive more than ever.
The biggest issue with R&D tax credits is education. Too many firms still think that eligible claims for R&D tax relief are reserved exclusively for laboratory scientists when nothing could be further from the truth.
Which industries can benefit most from R&D tax relief?
There’s an easy answer here. All of them. Any business in any sector might just be eligible for claiming R&D tax relief. All you must do is prove that your business has undertaken R&D activities that have sought to advance elements of your industry.
This could involve the development of new products, services or even internal processes that can improve environmental and financial efficiencies; or tweaking existing products or services to make them safer, greener, or more efficient for customers.
Better still, your R&D projects don’t even need to be profitable or successful to qualify for tax relief. Even loss-making companies can make a claim for R&D tax credits, receiving a lump sum cash reimbursement from HMRC in this instance.
Discovered that your business undertook qualifying R&D projects 18 months ago and are afraid you’ve missed the boat? Don’t panic. You can claim R&D tax credits within two years from the end of the tax year in which the projects take place. If reading this article is your company’s ‘lightbulb moment’, there’s still time to maximise your tax relief from recent innovations.
HMRC’s data on the businesses that claim for R&D tax credits each year show a growing number of industries are jumping on the bandwagon. Whether it’s transport and logistics, arts and entertainment or even administrative support, businesses like yours are getting financially rewarded for their forward-thinking approach. It’s time to follow suit.