Viewing entries tagged
R&D Tax Credits

How long will it take to claim r&D tax relief?

How long will it take to claim r&D tax relief?

RESEARCH AND DEVELOPMENT TAX RELIEF – HOW QUICKLY CAN I GET MY R&D TAX CREDITS?

From an initial meeting with you, claims take on average 8-10 weeks before the benefit is received.  So you understand what goes into this let's take a look at HMRC's processing time. 

HMRC R&D PROCESSING TIME

HMRC advise that the processing of claims can take between 4 to 6 weeks and is usually true for companies claiming tax credits.

There are various means for any claim to be processed by HMRC depending on its type and the final process can be dealt with by different departments.

For example, repayments of corporation tax are eventually processed by a corporation tax team and sometimes take longer. In addition, popular year ends (e.g. March and December) and national holidays can mean a delay in receiving your claim benefit. 

PREPARING THE R&D TAX RELIEF CLAIM YOURSELF

This time can be hugely variable, depending on the familiarity of the people building the claim and their understanding of the legislation. If you are looking at doing it yourself then you’d need a couple of months to fully read through and digest the legislation, then a fair chunk of time to build the technical narrative that the claim rests on. The accounting side takes less time, but of course is critical to get right. 

HOW LONG WOULD WE TAKE TO DO IT FOR YOU?

Companies can claim for the previous two years, meaning if your year end is December you have until 31st December 2017 to claim for the year ending 31st December 2015. This timing drives how urgent your claim submission is.

After our technical meeting, we write the claim and the majority of those are submitted on your behalf within 4 weeks, with very little further input from you. If timing is tight, however, we can deliver quickly for you - we haven’t missed a deadline yet.

Interested in talking to one of our Tax Advisors to find out what your claim could be worth?

Book a free consultation with us:

 

 

5 questions to ask your R&D tax advisor

5 questions to ask your R&D tax advisor

If you are aware of R&D tax relief you may be thinking about how it might apply to your business, and how to go about starting the process.

What questions should you ask when choosing a specialist?

1.     Experience - Do they have experience of claims relevant to your industry? A well established team will use their experience to optimise your claim values, and to ensure all of the relevant work is identified for each period.

2.     Knowledge - Do their team have a strong industrial background, broad industry knowledge and understand the guidelines?

3.     Service - Do they provide a fully managed service, leaving you to focus on running your business? You should establish how much of your time and input is required.

4.     Support - Do they support you in the event of an HMRC enquiry?

5.     Relationship - Some companies want to tie you in for years, others prefer to build a relationship with you through providing good service.

Your accountant may be able to offer advice, but unsurprisingly it’s not an area many accountants feel comfortable with. The HMRC guidelines suggest a technical report is provided to support the claim, and while your accountant will undoubtedly have an idea of the industry you’re involved in, it’s not a natural fit for them to develop a deep technical knowledge of your developmental processes, or to communicate that to HMRC inspectors in the correct way.

Some larger accountancy practices have individuals or departments who specialise in R&D tax relief, and they may be able to offer the right level of expertise to optimise your claim, but directors often choose a specialist company to work with.

This decision is usually based on an advisor’s understanding of the legislation and experience of working in your industry and their knowledge of the HMRC guidelines. A percentage of your claim value is charged as a fee for their services usually based on success only (no win no fee) and as you might expect there is a variation in charges, service, experience and knowledge.

For impartial and free initial advice, and to find out how G2 work with clients please get in touch.

WHAT ARE R&D TAX CREDITS?

R&D tax credits or ‘Research and Development (R&D) Relief for Corporation Tax’ to use the full name, is run and administered by HMRC.  It is designed to encourage investment in R&D and new product development and currently provides around £1 billion in tax relief to companies each year.  The scheme was set up in 2000 and is a vital Government incentive in supporting businesses and helping the UK economy to grow through innovation and development.

The scheme has improved significantly since its inception, with the rate of relief increasing consistently and restrictions being relaxed, extending the benefits to more companies.

OUR SERVICE AT A GLANCE:

  • Fully managed service
  • 100% success rate
  • Payment only when you see the benefit
  • No set-up fees or expenses charged
  • No long-term tie-ins
  • Team with industrial experience and expertise

Want to put these 5 questions to our team? Book a free consultation and we'll happily answer them for you!

 

This post was written by our Commerical Manager Alex Atkin

Does R&D spend equal greater profits?

Does R&D spend equal greater profits?

In a time of uncertainty with Brexit and questions over a potential decline in the economy companies will be looking over spend and working out where their money is best placed to future proof their business.

While investing in R&D itself doesn’t necessarily mean your company profits will soar, it does send signals to your staff and investors that you are serious about the future of your company.

And while Forbes make a compelling case for why R&D spend doesn’t necessarily indicate innovation, sighting other required factors like understanding your customers and business model, a quick double take at what Apple is currently up to blows that out of the water.

A look at Apples R&D spend

Strategy& at Price Waterhouse Cooper publish their Global Innovation 1000 Study each year in October, which investigates trends at the world’s 1000 largest corporate R&D spenders.

Apple is the leader of innovation, with the number one slot, and although they are 11th in the R&D spend table for 2016, their recent spend may see them edging higher up the spend charts when Strategy& release their 2017 report in October this year.

Over the last 9 months Apple spent $8.58 billion on R&D, 15% higher than the same period last year. Last quarter alone Apple spend $2.94 billion on R&D, making it one of the largest spenders in tech.

Now we don’t need to explain Apple products to you, I’m sure in your office a large percentage of your colleagues are Apple disciples. People who have Apple products love Apple with a fervour that’s not always found in consumables.

Apple know that to stay ahead of the competition, they need to develop products, create software, and ever faster manufacturing processes.

So has Apples increasing R&D spend resulted in more profit? Apple just released their Q3 earnings a few days ago and their profits have jumped by 17%.

R&D Company

And we can see here that as Apple's R&D spend grew, their income grew exponentially.  And Apple argues that even though it's R&D spend is massive, it is still more efficient than all its competitors.

R&D spend Vs. profits

We took a look at the top 3 R&D spenders in the Strategy& report and compared their spend with their current profits.

Volkswagen are the highest R&D spenders with a price tag of $13.2bn. Their announced first quarter profits are €4.4bn up from €3.4bn at the same time last year.

Samsung are second in the list with a R&D spend of $12.7bn and are expecting a 72% jump in profits for the last quarter. If true they will have overtaken Apple in profits for smartphones.

Amazon are third with a R&D spend of $12.5bn. Their story is a little more complex, while profits fell by 77% in the last quarter, Jeff Bezos temporarily became the worlds richest person, leap frogging Bill Gates (just for a little bit). So, Amazon is clearly making money somewhere!

R&D spend equals higher profits

Now we know that not all companies are the Apples, Samsungs, Volkswagens and Amazons of the world, but if we take these examples we can see that investing in your business does equal profits.

We’re not suggesting that upping your R&D spend is going to magically increase your profit share. These are big businesses, with lots of facets to why they are successful, but a common denominator is their high investment in R&D.

We'd love to talk to you if you're thinking about investing in R&D for your business. We're in a unique position as we're engineers and product designers, who also have experts in R&D, so we can take you through the whole process. Talk to us about R&D opportunities for your company.

2017 Global Innovation 1000 Study

We’re looking forward to Strategy& findings for 2017 when they release their next report in October. Keep checking back at our blog for our response.

Want to talk to one of our team about your potential R&D claim? Book a free consultation and we'll give you a call:

Is R&D Tax Relief too good to be true?

Is R&D Tax Relief too good to be true?

Even though R&D tax relief has been available since 2000, we still have clients ask us if it is legitimate.

It can sound too good to be true, but trust us R&D tax relief is the real deal, we've been successfully claiming for our clients for 8 years.

On average companies who successfully claim R&D relief get between 26% and 33.35% of their development expenditure back. You get more money back for every pound you spend and with our average client claim standing at £40,000, it’s definitely not something to be sniffed at.

It’s also true that huge amounts of R&D tax credits are left unclaimed every year, allowing overseas competitors to steal a lead in R&D and innovation.   

Encouraging Innovation

Since being introduced, successive governments have consistently made the relief more attractive in an effort to incentivise businesses to develop new products.

The rate of relief has consistently increased under all political parties, evidencing a recognition that this is a valuable tool for stimulating the economy.  You get more money back, for every pound you spend and at the same time the criteria for research and development expenditure has been expanded, making it a more attractive proposition.

You can even claim if your project is unsuccessful as it shows that your work demonstrates a level of uncertainty involved in project, making it eligible.

Is R&D relief just for the UK?

The UK is not on its own on supporting this with an R&D relief. Every major economy has an equivalent scheme.  They have this trend and the move is towards rewarding and supporting innovative companies that invest in product development.

This is all part of keeping pace with our global economy.  And there is a general recognition that manufacturing is cheaper in the Far East. To compete with low cost manufacturing, companies are adding value through design and innovation – resulting in the creation of the knowledge economy.

If you are in the situation that your products are being made in the far east or elsewhere, you may still be able claim tax relief. The government recognises the investment made where costs from the development are incurred by the UK company.

Making a R&D claim

Making the actual claim can be a complex process, which is why companies like us are here to help you!

It pays to be aware of all the elements you can claim for so you can maximise your relief amount. We’ve been doing this for a decade now and have a 100% success rate, which makes us feel pretty proud!

We do also work alongside accountants, and our experience is that as they don’t always understand the full extent of the claim. It’s not just about tax; there also needs to be an understanding of the technical nature of your work and not everyone is a specialist in what you do.

It’s not just about people in white coats with clip boards and safety glasses – although you can wear them if you choose!

Over the past decade we’ve worked with companies across a variety of industries including; software, robotics & automation, agriculture, quarries, food, aerospace and gas & oil.

We don't think R&D Tax relief is too good to be true, in fact we can tell you if your business eligible. Why not book a free consultation with one of our team and we'll give you a call at a time that suits you:

 

 

More UK Manufacturers are claiming R&D Tax Relief

More UK Manufacturers are claiming R&D Tax Relief

A report by accountants RSM has found that 59% of UK manufacturers have claimed R&D tax relief in the past. This is a far cry from the normal quotes banded around about only 5% of companies knowing that R&D tax relief exists and we welcome this change. It’s good for UK manufacturing and good for the UK as a whole.

So, what about the other 41% that are not currently taking advantage of the opportunity?

There are questions around eligibility and ease of access that need to be addressed.  We know from working in this industry for 8 years that perceptions of R&D relief and the facts are sometimes mismatched.

Making a R&D tax relief claim

Claim criteria has changed quite significantly since R&D relief became available in 2000, so businesses that may previously not be eligible may be pleased to find out they may now be successful.

There is also a misconception that the process may be too difficult and the rewards not worth pursuing. Our service is designed to take up as little time for the company as possible.

Following an initial phone conversation where we’ll be able to confirm eligibility, we’ll come and meet with you to discuss your work in more detail. From there we take care of everything, from compiling the claim through to liaising with HMRC. Once submitted your claim takes on average 4 to 6 weeks to be processed.

We only charge for our service once your claim is successful and we pride ourselves on making the process as pain free as possible.

UK Manufacturing R&D Facts

Between 2013-2015 more than 6,000 UK manufacturing claims were made totalling £770m, so we’d advise anyone who is not sure of a claim to get in touch with us.

UK manufacturing generates more than 50% of exports and 70% of UK business innovation. At a time of uncertainty with Brexit & concerns around recruiting and retaining talent, a thriving manufacturing sector is more important than ever.

We all need and want a healthy manufacturing industry. To leave potential funds on the table seems like a risk businesses don’t need to be taking.

Here’s some UK Manufacturing R&D facts for you from HMRC:

·        10% rise in the number of manufacturing claimants between 2013-2015

·        ‘Manufacturing’, ‘Professional, Scientific and Technical’, and ‘Information and Communication’ sectors continued to have the greatest volume of claims, making up a total of 75% of claims and 77% of the total amount claimed for 2014-15.

·        Between 2000-01, when the R&D tax credit schemes were launched, and 2014-15, over 141,000 claims have been made and almost £14.0 billion in tax relief claimed.

·        30% of all R&D tax relief claims were from the manufacturing industry in 2013-14. Between 2013-2015 more than 6,000 claims were made totalling £770m

Learn more about changes in the Corporation Tax Landscape and find out about Philip Hammonds plans for the UK economy

Think you might be eligible for R&D?

Call us on 0115 842 0402 for a free consultation.

Read RSM's Manufacturing Monitor 2017 and the HMRC Research and Development Tax Credits Statistics in more depth.

Photo by Samuel Zeller on Unsplash

Autumn Statement & spending review – R&D relief and spending

Autumn Statement & spending review – R&D relief and spending

The press headlines are focused on the personal tax credits and how the cuts have been shelved, with the new forecast from the Office for Budget Responsibility forecasting sufficient extra income to persuade the austerity to look elsewhere and save some political face.

Conspicuous by its absence though was mention of the R&D tax credits and relief. Having received a boost in the last budget announcement they were left well alone in the review, and remain a strong and highly effective incentive for technically minded companies. When done professionally they can reduce tax bills, provide cash from loss and allow greater investment in new development work. Ask us how we can help you access it.

A brief summary of the increases in R&D spending announced

·      Science resource funding to rise in real terms to £4.7 bilion per year for the rest of the parliament.

·      A new body is planned to be introduced, called Research UK. This will work strategically across the seven Research Councils (science focused funding and steering bodies), taking a longer term view. Innovate UK helps commercialise technology; this body will be incorporated into Research UK but still exist.

·      There is already a government commitment to spend to build the UK’s research base, to the tune of £6.9 billion between 2015-2021. Around £150 million (total capital and resource) will launch a competition for a Dementia Institute, to build on the UK’s strengths in medical research.

·      The “Northern Powerhouse” gets its own investment fund of £400 million to invest in smaller businesses. The Enterprise Zones programme for the Northern Powerhouse will also be doubled in size with 7 new zones and 2 extended. The government will also be providing £50 million for 2 new agricultural technology centres in York for the food and farming supply chain.

·      Good news for the north continues, with £15 million of funding to support further Northern Powerhouse trade missions including to key emerging economies, and £7 million for a “Northern Powerhouse Investment Taskforce”, to bring “the authorities and businesses of the North together to present a single internationally competitive offer to the world.”

·      Over £130 million capital will be invested in Department for Environment, Food and Rural Affairs’ (DEFRA) science facilities, with £5 million specifically to further improve the HQ of the Centre for Environment, Fisheries and Aquaculture Science following its 5 year renovation.

 

The complete statement:  https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/479749/52229_Blue_Book_PU1865_Web_Accessible.pdf

 

0115 824 0402

 

Why not find out more about R&D Tax Relief on our blog

 

 

Research and Development thrives with R&D tax credit claims up by nearly 25%

Research and Development thrives with R&D tax credit claims up by nearly 25%

The heartland of UK industry is the SME, and latest government data proves just how much technology development is still performed in the UK. The government’s R&D tax relief is aimed squarely at companies developing new technology, rewarding them with tax breaks for the technological risks they take, from developing new farm equipment to blue sky biotech.

R&D tax claims have risen almost a quarter in the last year from around 16,000 claimant companies to 20,000, with claim values totaling £350m. Since 2000, 120,000 claimants have claimed £11.4 billion in tax relief.

Small and medium sized businesses have been the star performers of the UK economy in recent months with the majority of these claims made by SMEs, which rose by 23% and large companies rising 4%. 

The rise was seen across the country but with London, the east and southeast continuing to be the highest areas for claims at a total of 46%of all claims SMEs from the rest of the UK should really look into the R&D tax relief as many are missing out. A typical claim value is around 20p in every pound spent on development, usually repaid in cash by HMRC.

As the popularity of R&D tax claims rise, the chancellor took the politiucal opportunity last year to further boost innovation by announcing an increase in R&D tax credits to 230%. This means that for every £100 of qualifying costs, the corporation tax paid by SMEs on income could be reduced by an additional £130 on top of the £100 spent - which is great news for business.

 

0115 824 0402

 

NOTES:

SME –a Small to Medium sized Enterprise that is; less than 500 staff AND up to €100 m turnover OR up to €86 m balance sheet value

 

Why not check out our previous R&D blog post about how to prepare for a future claim

R&D Tax Relief: Is R&D spending a victim of austerity?

R&D Tax Relief: Is R&D spending a victim of austerity?

Is R&D spending a victim of austerity?

The Office for National Statistics recently released some data about government spending on R&D (here) and we’ve been having a closer look at it. If you were to ask a UK manufacturer if it’s up or down you could expect a negative answer, as budgets are slashed further each year in this age of austerity. The reality is a bit more complicated. UK public spend on Science, Engineering and Technology in 2013 (the last year we have data for) was £10.9 billion, an increase of 9% versus 2012 and on the face of it good news. It also reverses the downward trend in R&D expenditure that’s been there since 2009, but it’s still far from the pre-recession peak. There are winners and losers within these figures though, so let’s take a quick look at them.

Research Councils stay steady over a longer period

The government funded Research Councils invest in research, covering academic disciplines from medical and biological sciences to astronomy, physics, chemistry and engineering, social sciences, economics, environmental sciences and the arts and humanities. Their budget was increased for 2013, but when you take into account inflation it’s in real terms stayed at it’s 2008 level, following an increase from £2.5 billion to £3.4 billion between 2002 and 2008.  

University R&D spending

A similar story can be seen with UK higher education spending, with a slight increase from £2.1 billion in 2002 to £2.4 billion in 2013, again affected by inflation. The grassroots pressure group Science Is Vital says that the apparent rise is further misleading though, as the total figure includes an increase in capital spending but also a drop in cash funding for science projects.

Who lost out in R&D taxpayer spending?

There have been specific increases in expenditure from 2002, but the overall budget has stayed quite steady, so who has suffered? R&D in defence, dropping £2.1 billion since 2002. It’s subjective and controversial as to how defence R&D should be regarded, but it’s clear this is where the savings have been made. 

Our R&D spending versus our neighbours and competitors

Back to the bigger picture; the overall R&D figures put us in the position of spending the lowest proportion of our GDP on R&D of all the G8 countries (see below), with 0.5% spent, compared to an average of 0.8%, and this doesn’t compare favourably with our European competitors like Germany (0.89%) and France (0.82%) or our cousins across the pond with their 0.86% spend on R&D. We believe research and development is vital to the UK’s future (it’s why we do what we do) and while it’s great to see R&D spending starting to increase again, more is needed to keep the UK competitive.

 

0115 824 0402

 

1:  UK Government Expenditure on Science, Engineering and Technology, 2013

2:  The G8 is: Canada, France, Germany, Italy, Japan, the Russian Federation, the United Kingdom and the United States

 

R&D Tax Relief: Dividends, salary, and bonuses

R&D Tax Relief: Dividends, salary, and bonuses

Dividends, salary, and bonuses – what can I claim in my R&D tax relief?

You can claim a range of payments for you and your staff, but there are some exceptions.

When you make a claim for tax relief via the Research and Development scheme you are claiming on behalf of the company, and the costs that it has borne in undertaking the R&D.

Some of these are obvious – like the parts used in making a prototype. Some are less so, like the complex subcontracting rules (see my last blog), or types of pay and how much of those costs to add to the claim. 

Full-time salaried staff and their eligibility

You’ll be able to claim on the taxable salary of someone working on the R&D, plus anything that the company pays into a pension for that employee.

You can also claim the Employer’s National Insurance contributions, but you can’t claim the employee’s N.I. or their personal contributions to their pension. You can claim bonuses too, as they are taxable. 

Expenses and Benefits In Kind

This area is a surprising one, as you can’t claim expenses paid for by a company credit card, but you can claim for expenses paid by an employee and then repaid by the company to the employee.

Don’t forget, of course, that the expenses have to be directly related to the R&D itself; as an example, a market research trip to a trade show is not R&D. Non-cash Benefits In Kind (like cars or accommodation) cannot be claimed.

Directors pay and the R&D claim

Directors paid by salary fall under the same category as other full-time salaried staff, with the same restrictions. Dividends, however, cannot be claimed, and this can impact on claims, especially for smaller companies.  

How much of each person’s costs can I claim? 

This isn’t an easy question to answer, sorry! It will vary based the involvement of each person.

Interested in talking to a R&D Tax Advisor about your potential claim?

Book a free consultation with us, we live and breath R&D and we've 17 years of expertise, with a 100% success rate!

 

R&D Tax Relief: Grant Funding

R&D Tax Relief: Grant Funding

Does grant funding stop me being able to claim R&D tax credits? 

No, it doesn't, you can still claim R&D relief and tax credits. What it does do is affect what and how you can claim, and complicates the claim process, which is easy to get wrong. R&D driven companies are often recipients of grant funding, and it's still worth doing both. I'll briefly cover the main ways they interact, but individual situations are usually more complex and need dealing with on a case by case basis. 

Who gave you the grant?

Let's start with the assumption you are an SME (definition below), so you are claiming the higher level of R&D enhancement of 130% (more here if you need it). If your grant is from a UK source it's highly likely it's classified as "State Aid", and this prevents you from claiming at the SME rate. You can still claim though! The reasons are complicated, but you can claim R&D relief under the Large Company part of the R&D relief scheme. The Large Company enhancement rate is only 30%, but bear in mind that you've already used the grant to reduce your costs, and you'll be claiming on the entire cost of the project, not just your own contribution to its costs. For this reason it's worth considering using a grant (if you accept it's own potential pitfalls) along with claiming R&D relief.

Europeans are different

Your grant funding might come from a European source, where many of the grants awarded are not classified as "State Aid", and the way you claim changes again. The "State Aid" rules are there to ensure as level a playing field as possible across member states, but funding from the EU itself often isn't subjected to this. In this situation you claim the funded part under the Large Company part, but your own expenditure is under the SME part of the scheme. Your grant provider will clarify whether your funding counts as State Aid or not, or we can help.

All or nothing? 

So you've had grant funding, and you can claim R&D relief, and the good news continues. You might think that if you've got "State Aid" grant funding your entire R&D claim will be under the Large Company scheme. It's actually possible to claim both SME and Large Company relief in the same accounting period, as long as the funded and unfunded work are in separate projects and identified carefully.

Can I get paid now? 

You might have heard that companies claiming under the Large Company scheme can only save tax in the future through carrying loss forward, but actually since April 2013 you can get cash back with that scheme too. Yes, this is a summary of the highest level, so please give us a call if you think this will apply to you, or in fact if you have any questions about anything I've written.

 

0115 824 0402

 

NOTES:

SME –a Small to Medium sized Enterprise that is; less than 500 staff AND up to €100 m turnover OR up to €86 m balance sheet value 

Enhancement values – when you worked out your profit you recorded your costs at what they cost you, 100%. For SMEs you can add another 130% to your R&D costs, and for Large Companies an extra 30%. These act to reduce your taxable profit and save you tax….. 

 

See our previous blog

 

R&D Tax Relief: An Introduction

R&D Tax Relief: An Introduction

Is your work eligible for R&D tax relief?

You may have heard about the government’s R&D tax credits scheme and wondered if you were eligible for it. Before you spend too much time on it, you can figure out quickly if it's likely that you are eligible.

How advanced does my work have to be?

If you are doing gene therapy then great, you can claim! Most of us aren't though, and you might think that working in packaging, or in moving things about, or in metalwork or software means that you can't claim. We've claimed for all of these, and more.

Think about your company's working week, and think about how much of the time you are solving problems. If you are scratching your head over problems on a regular basis then it's worth looking at the scheme. 

Is your work creative or technical?

The legislation makes a clear distinction (along with a long, long list of other areas) over the difference between creative and technical work. Highly skilled craftsmen making luxury leather goods are most likely not undertaking R&D, but highly skilled engineers figuring out how to achieve a very high tolerance result could well be.

Can you claim if you are working for other people?

You might think that solving problems for other people might mean you are ineligible to claim tax relief on your work. Though the details can be tricky, working for another company does not necessarily stop you claiming your own tax relief.

Do you claim yourself or use a specialist?

These are just a few of the eligibility criteria that you have to know about, and whilst they are the most important when it comes to looking at the work you are doing there are many more, and that's before the tax computations side. Learning about all the detail takes a long time, and employing a specialist like us is often a better balance of time vs reward.

 

0115 824 0402