The benefits of R&D tax credit claims
Did you know that HMRC offers R&D tax credits and reductions for businesses that have created a new or modified an existing product, service or process?
We spoke to Roger Daynes, Area Manager at Amplifi Solutions, a forward-thinking R&D tax specialist firm, to tap into his knowhow on the requirements and benefits of R&D tax claims.
In this interview, Roger answered questions about how to qualify for R&D tax credits and the trends involving R&D across the UK.
R3NDER - What are R&D tax credits, and how does a business qualify for them?
Roger Daynes - R&D tax credits are a significant, if not flagship, state aid measure. They're a tax reduction for profit-making businesses or a cash injection, in terms of tax credit, for businesses that are innovating.
It can apply to businesses across all sectors. Chief amongst those would be software development firms and life science businesses, for example.
We also see significant levels of innovation in manufacturing and engineering, which would be particularly relevant to R3NDER’s clients.
The essence of innovation is identifying a gap in the market and creating a solution to solve that problem.
R&D tax credit claims can be made annually, and predominantly, costs are; people, consumables, and even utilities. Many businesses don't think they're innovating but are. Only one in three eligible businesses claim.
R3NDER - How much is the minimum annual spending on R&D for a company to be eligible to receive R&D tax credits?
Roger Daynes - The minimum spend to make a tax deduction or tax credit back worthwhile would typically be in the region of £40,000 in any given accounting period.
Businesses can claim up to £0.33 pence in every pound of R&D qualifying spend. We're talking about significant amounts of tax credit back. That £0.33 will slide down slightly to 24.7 pence of every pound for profit-making businesses.
The average UK claim on an annual basis is just short of £60,000. It's a significant cash boost to businesses to be availed, however they wish it to be.
R3NDER - Why should a company hire a consultancy such as Amplifi to help them with R&D claims? What are the benefits?
Roger Daynes - Fundamentally, it's about harnessing the potential of the scheme itself. Are you getting the most out of the scheme? Are you capturing as much cost as possible? Can you build a narrative that explains to HMRC precisely what your company has been doing, the challenges it's been overcoming and the resultant outcome?
It's very important to choose a provider that will optimise the outcome for you in terms of the cost capture, the granularity of that and the robustness of the claim. In other words, it's going to be defensible? If the HMRC decide to scrutinise or audit any claims, we want to try to maximise the weight of claim benefit. So the higher the claim benefit, the more cash saved for that particular business.
We have a long experience in the market, 20 employees, several hundreds of clients, and our audit rate by HMRC is less than 1%. That speaks to the fact that we build robust and granular claims. It's just like any aspect of life; you want to look at getting the best service. Sometimes that may come at a slightly extra cost, but the net outcome is more than worthwhile.
Watch the interview:
For more information, visit their website.