How to use R&D tax credits to help your business during these difficult times

R&D (Research & Development) tax credits can be worth thousands of pounds and can have a major impact on many companies. This injection of funds is welcome at any time but especially during an economic downturn or challenging period, as many businesses currently find themselves in. Here we discuss how to use R&D tax credits to help your business during these difficult times.

Who can benefit from R&D tax credits?

The great news is that all companies in the UK can potentially benefit from R&D tax credits. Some companies may assume they are not eligible due to the fact that they are small SMEs, but this simply isn’t the case.

Has the R&D Tax Credit Scheme changed since the pandemic?

Luckily, the R&D Tax Credit scheme is currently still working in the same way it was before the global pandemic hit, which is great for companies who were already considering applying for them as the criteria are the same. The purpose of the R&D credits is to boost innovation within the UK economy, allowing companies who are undertaking innovative projects to claim back a potentially large percentage of their overall R&D costs.

Companies can only claim if they can prove that the innovations they are undertaking are addressing a technological or scientific uncertainty. This, however, is a broad overview, so if you believe your company may be undertaking activities that could be classed as R&D then it is important to speak to your accountant as they will be able to let you know whether or not you are eligible to claim.

How the current pandemic has changed R&D

Although the R&D Tax Credit scheme has not changed due to the pandemic, there may be companies out there that now are eligible to claim for these credits due to the shift in their way of working due to the pandemic. Therefore, businesses should consider whether they have any projects that are worth putting forward.
For example, the shift to remote working has forced many companies to quickly adapt and go digital. To do this, IT structures have had to be strengthened or have new software created. Whilst off-the-shelf products and services will not be eligible, if there is a level of customization or bespoke aspects to the project, R&D tax credits may be available.

What projects are eligible?

The complete list of eligible projects for the scheme is vast, however, companies can typically claim R&D tax credits for the following:

• Creating new/bespoke Software
• Creating new products or services
• Changing an existing product, service, or process
Once your project has been deemed eligible, the company can claim for a host of “qualifying expenditure” including:
• Direct Staff Costs
• Subcontracted R&D
• Materials, heating, lighting, and water costs plus any other “consumables”
• Money paid for any clinical trials
• Software

Discover more about how to make the most of R&D tax relief in our blog here>>

How do the credits work?

When a company is eligible to receive R&D tax credits, the tax relief is offered as a reduction in the company’s corporation tax. Alternatively, it can be paid by HMRC as a cash lump sum to companies that are currently loss-makers. This access to a cash reduction in corporation tax or a cash refund can potentially be a financial lifeline for many companies during these tough economic times.

Many businesses are still unaware that the scheme exists, despite it being around since the early 2000s. However, the pandemic has taken its toll on a lot of industries, so access to this relief can provide a much-needed cash boost.

Another benefit of the scheme is that HMRC is currently taking 28 days or less to process the claims, meaning companies do not have to wait long for financial help.

As you can see, there are many ways in which R&D tax credits can help your business during these difficult times.
If your business has recently undertaken any R&D projects, regardless of what industry you are in, then now is the time to apply for the tax credits. Not only can it help save you money, but it can also help towards protecting jobs, give you an edge over your competition and boost your business in the future. It is worth claiming as soon as possible, so if you think you may qualify speak to your accountant who will be able to go through the entire process with you.