R&D Tax Funding Strategy for Your Business

Aug 02, 16 R&D Tax Funding Strategy for Your Business

When you are running a business, there are a number of things that you would consider, since money is of utmost importance. One such thing is to save the huge amount of taxes that you pay to the government. This is very true if your company is working on R & D activities. This is because, the cost incurred in running such business is very high – but the results are not guaranteed. Meaning – it would take time for your research to yield the desired results.

But now, relax, you can use the R&D tax funding strategy for your business and save the taxes that you pay to the government.

R&D Tax Funding Strategy for Your BusinessWhat is R & D tax funding?

As the name indicates, it is the fund that is given to projects that are working extensively only on research activities. If your project activities are research in nature, then you would be working on experiments and that would lead to observation, analysis and then an outcome. In such cases, the risk involved is very high. But at the same time, such research and developmental activities are essential for the growth of a strong economy. Hence the ATO, in joint venture with the AusIndustry (On behalf of Innovation Australia) has come up with the scheme called the R & D tax funding.

What is R & D tax funding strategy for your business?

Since your company and the project may have a lot of uncertainties and risks, there are a large number of companies that are ready to provide credit for these research activities. This is called the “tax credit finance”. While you are considering companies to finance for your research activities, it is important that you check the terms and conditions associated with the credit facility that is provided to your company.  It is also essential for you to check the charges levied, interest rate and the general terms that would meet the specific needs of the research activities that your company is undertaking.

Using this type of tax funding strategy for your business is very essential. When the Research and development activities receive such financial aid- in the form of R & D Tax credit (https://en.wikipedia.org/wiki/Research_and_Development_Tax_Credit) finance, it helps the company to:

o  Involve greater in research activities by not worrying about the capital raising options.

o  Invest more resource and time into research activities.

o  Develop products that are not commercial in nature by making use of the advanced technology.

o  These research activities would help the larger masses and hence the development of the country’s economy.

Eligibility Criteria:

Since there are companies that will be financing your research and development activities, it is important for you to understand the eligibility criteria for availing this finance.

•  First and foremost, your research and development activities should be registered with the AusIndustry (which runs on behalf of Innovation Australia). Registering your project activities is a legal requirement for availing the R & D Tax incentive and also the related finance.

•  Secondly, your company/business should be a regular payee of the CT (corporate taxes) with the government.

•  Thirdly, as the name suggests, the projects that you are undertaking should be purely research and development oriented. Meaning – it should be related to the development of science and technology and also helping the larger masses of the population.

Generally, companies looking for R&D Tax funding, finances only technology related research activities. However, if your company is developing any new machines, prototypes, software’s for the welfare of the larger masses and not commercial in nature, your company can still be eligible for this tax credit which is provided by the ATO – and hence could think of having a R&D Tax Funding Strategy.

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A Guide to R&D Tax Relief

Jul 12, 16 A Guide to R&D Tax Relief

Is your company working on research and development? Then there are ways with which you could save the exuberant taxes that you pay to the government. Read on to find out more about what is in store for you for this year’s taxes in the form of R&D Tax relief!!

The R & D Tax relief:

Since your company is research oriented, you would be working on new technologies. This could be in the field of medicine, software, airfield etc. It could be a research into any new advancement which could help the larger masses of the society. In this scenario, your expenditure would be very high. So the government has decided to provide a tax relief – in the form of money to such companies which are research oriented. This is called the Research and development tax relief.

A Guide to R&D Tax Relief

Initially, this R&D Tax relief was given only to large companies. But the amendment was brought about around 2013, to encourage even small companies to be research oriented. With this amendment, SME (small and medium enterprises) and even start-ups can avail this facility. This amendment was basically done to encourage creative and effective development of innovation and technology – which is the need of the hour. The government believes that encouraging research and development activities will improve the economic condition of the country.

The terms and conditions to avail the tax relief:

1.  Your company should be research oriented.

2.  You should also be a payee of the corporate taxes. Meaning, that your company should be paying corporate taxes to the government. In this case, the tax relief that is provided by the government is deducted from the corporate taxes that you pay. Essentially, you would then be paying lesser amount as taxes to the government. If you have paid for your company’s corporate taxes for a minimum of two years, you would qualify to avail the credit facility.

3.  Also, your company should have enough cash-flows. This criterion is added to make sure that your company can sustain on its own, without only depending on the research and development tax relief only.

How to avail this facility:

Once you know that your company is eligible for Research and Development tax relief, all you need to do is to file this information – at the time of filing your corporate taxes. You need to mention if your company is an SME, start-up or a Large company availing this facility. It is good to provide some details of your research activities and also the cost incurred by your research activities at the time of filing the returns.

The benefits:

Since your company is into R & D, your capital expenditure can be very huge. But since this is important not just for your organisation, but also for the economic development of the entire country, the government will cover the following capital expenditure while providing you the Research and Development tax relief (https://www.gov.uk/guidance/corporation-tax-research-and-development-tax-relief-for-small-and-medium-sized-enterprises).

–  The staff cost that is required to run your organisation.

–  The software cost. Remember, that the software cost that you claim should be directly used only in the research and development activities.

–  The cost for hiring contractors and sub-contractors.

–  Last, but not the least, your material cost. Again, here it is only the material that is directly used for research and development purposes.

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