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Small business (SMEs)

Small business (SMEs)

Over 75,000 successful claims, worth over £4bn were made by SMEs for Research & Development Tax Credit*
Are you missing out on this valuable tax incentive? Find out how you could receive assistance from the Government for developing new products, processes or services. * Source: Latest HMRC Research and Development Tax Credits Statistics September 2021

What are Research and Development (R&D) Tax Credit for SMEs?

The R&D Tax Credits Legislation was introduced by the Government, in the Finance Act 2000. The initiative is designed to stimulate our economy, by incentivising businesses to invest in research and development. This is achieved by rewarding them for that investment, by reducing their Corporation Tax liability and/or a payable tax credit.

What research and development qualifies for R&D Tax Credits?

Firstly, there are two question that you need to ask:

Are you producing new or improved products, processes or services?

Did the design and development of those products involve technological and scientific uncertainty for which the solutions were not obvious?

If the answer to both questions is yes, the chances are that you could qualify for R&D tax credit. As a result, this is probably the most complex part of the R&D Tax Credit process, as it’s an area open to interpretation. Thankfully, this is where our specialist skills, along with our extensive experience is particularly useful! Read our blog “What qualifies as R&D?” for some examples of qualifying R&D.

What expenditure is eligible for R&D Tax Credits?

Staffing Costs

Consumables

Software

Clinical Trials

Independent Research

Prototyping

Subcontractors

Travel

The benefit to SMEs claiming R&D Tax Credit

Under the SME R&D tax credits scheme you can increase the allowances for Corporation Tax, by a further 130% of your qualifying expenditure.
If you spend £75,000 on eligible R&D, you will receive a tax deduction of £97,500. At a Corporation Tax rate of 19% this equates to an additional tax saving of £18,525 in addition to the normal Corporation Tax allowance adding up to 230%.
If the company does not pay Corporation Tax in the period of the claim you can still enjoy a cash refund of 14.5%. The third alternative is to bank the tax credits for use when the company does make a profit, which would give a benefit of 19% (or whatever Corporation Tax rate prevails at the time).

Could You Be Eligible?

If you would like to discover whether your business may qualify for R&D tax relief
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Is the R&D Tax Credit scheme for SMEs, right for you?

The legislation is quite complex but broadly speaking, the criteria for a company to claim under the SME scheme, is that they employ less than 500 full time members of staff. Alongside this, the company would need a turnover of less than €100m or balance sheet assets of less than €86m. If you do not meet the criteria to be classified as an SME, don’t worry. You may be still eligible for relief under the Research and Development Expenditure Credit (RDEC) scheme.

Our Step-by-Step guide to R&D Tax Credit claims

When working with Fiscale, we make the process of claiming SME R&D Tax Credit as simple and painless as possible.

Assessment

We establish if the research and development that you are undertaking, meets the criteria as set out by HMRC. This is usually done over the telephone, followed by a face-to-face meeting. This is to ensure that you are eligible and if so, we will then start the claims process.

Technical meeting

Following the initial meeting to establish eligibility, we will then arrange a follow up to get to know (and understand) the work that you are undertaking. Typically, this meeting takes two hours and involves going though potentially qualifying projects in detail. At this meeting we will talk to the members of your team who are involved in the R&D, along with your financial team. We will also outline what is involved in processing a claim and the level of input required by your team.

Draft report

As a result of the in depth technical meeting, we are then able to draft a report that is based on our discussions and all of the information that you have provided. We will be looking at every angle of your R&D, to ensure that we maximise the value of your claim.

Submission

Once the report has been agreed by you, we then submit it to HMRC and deal directly with them on your behalf. You have the peace of mind that the report will be an accurate representation of your activities. We will also ensure that it is presented in a way that meets the requirements of HMRC.

Review

Once the claim has been made, we will review your systems to help identify any areas of record keeping to support future claims. As a result, all future claims can be streamlined, making the process more straightforward.
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Could You Be Eligible?

If you would like to discover whether your business may qualify for R&D tax relief
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