The government is concerned that many small companies are missing out on generous R&D tax credits. For the last year HMRC have been offering companies an advance assurance scheme to check whether or not their activities qualify before they make a claim. So far over 200 applications for advance assurance have been made.
There is a general misconception that R&D involves scientists in white coats but it should be remembered that R&D may be necessary to resolve a problem with a product or a process.
So some of the work by your engineers or technical staff may qualify as R&D. For Small and Medium-sized Enterprises (SMEs) the tax credit is 230% of the expenditure on qualifying R&D, and where the company incurs a trading loss, HMRC will provide an immediate cash refund rather than waiting until there is a profit in a future period.
By applying for advance assurance the company’s R&D claim will not be subject to an HMRC enquiry and HMRC will then accept the first three years of claims.
Companies eligible to apply for advance assurance:
- turnover below £2m
- fewer than 50 employees
- no previous R&D claims
Then claim “patent box” in respect of your innovation
If the R&D results in a product or process that can be patented there is a further tax break available. The “Patent Box”, introduced in 2013, will provide a 10% rate of tax on profits derived from that product or process.
Please contact John Elliott if you would like to discuss whether these generous tax breaks could be available to your company.