SME’s nationally could be missing out on up to £120,000 by failing to claim R&D Tax Credits, with many companies unaware that they may qualify.
09 May 2012
George Osborne in his March 2011 budget stated he wanted to attract more companies back to Britain and stimulate the economy. The way forward is investment and encouraging innovation, echoed from the Dyson Report and the changes in uplift percentages represent a bridge in achieving the overall increase in net cash benefit for companies.
HMRC states that the average SME claim is £43,000. Given companies can go back 2 years plus the current financial year, that’s a potential £129,000 for 1st time claimants. The R&D Tax credit has risen to 200% last year and 225% in 2012.
WHAT ARE THE QUALIFYING CRITERIA?
The definition of R&D is wide, stating that companies need to be ‘seeking to achieve an advance in science or technology’. This can comprise of seeking to create new technical knowledge, appreciable improvement and/or the development of new capabilities.
To qualify, companies also need to be overcoming ‘technological uncertainty’. “Technological uncertainty exists when knowledge of whether something is scientifically possible or technologically feasible, or how to achieve it in practice, is not readily available or deducible by a competent professional working in the field.” ( DTI Guidelines ). It is fair to say that this all-important caveat favours the interpretation significantly.
Qualifying development within a communications industry environment can involve characteristics of iterative testing, integration between legacy components, processes or systems, making services faster, more secure, or cheaper to provide. A qualifying R&D theme for technology companies could easily be a development project aimed at increasing speed and ease of use, without compromising quality.
The bottom line is that the case for an R&D claim does not need to rely on having a unique or ‘industry first’ end result. Instead, we need to assess the journey of how a company got to its end result, not forgetting that failed projects can also qualify!
Assuming the claimant meets the qualifying criteria, any company can claim, regardless of their profits, turnover or losses. The key is any business “innovating, improving, developing or adding value to products or processes”.
The phrases in the guidelines are vague in this respect, in order to make the scheme as flexible as possible for all industries and sectors. A key test is the judgment of a ‘competent professional’, mentioned earlier. This really means that it is vital that technologists assess the activities included in the R&D claim. Identifying the boundaries of the qualifying activities means understanding the R&D rules and the technology being developed, and also the associated tax and accountancy aspects. That’s why we advise engaging a specialist to prepare and maximise a claim.
The application process can seem complex, though with the right third party support, such as that offered by Government Grant and Tax Consultants, this task can be outsourced with no risk, allowing any money due to be released, usually within 3 months, whilst leaving companies free to focus on ( and ultimately reinvest in ) their core activities. What’s more, companies can then continue to claim every year for as long as they undertake scheme qualifying activity and there are no restrictions on how the money is reinvested.
AIME will be holding a workshop to enable members to explore the scheme further and assess their eligibility. Dates for the workshop will follow, though Members can pre register by emailing email@example.com