How and When to Claim R&D Tax Credits?

Aug 23, 16 How and When to Claim R&D Tax Credits?

If your company is working on projects that are related to research and development, then you stand a chance to avail these credits from the government – in terms of paying your corporate taxes. The credit which is given to companies working on R & D activities is called the R & D tax credits.

This is an initiative started by the government of UK to encourage such activities which are essential for the development and sustenance of a strong economy. It is important to know if your company qualifies for this initiative. Both SME (Small and Medium Enterprise) and large companies are eligible to claim the credit. The main criterion is that your project should be in the field of science or technology. It could be research in the field of scalability, performance, integration, or product development. The solution to the problem is that your research is being done on should not be known to the general public. However, it should be innovative and creative in nature too. This initiative was started to increase innovation and wealth creation in the economy.

How to claim the R & D tax credits?

There are two parts involved in claiming the R & D tax credits.

•  Technical Aspect – contains the details of every technical aspect in research.

•  Financial Aspect –takes care of the actual cash flows between your company and the government.

a.  Technical Aspect: To claim for the R and D tax credits, you need to remember that you should provide a technical narrative to the HMRC. A technical narrative is a document that will provide all the details about your project:

o  The problem statement that is persistent in the technological and scientific field.

o  The solution which your research activity is aiming to provide.

o  The cost incurred for the research activities.

o  The day to day transactions of your activities and the material costs incurred for the same.

o  The persons/employees working on this activity.

b.  Financial Aspect: The financial aspect includes the administrative procedures involved in filing the returns. The R & D tax credits claim needs to be done along with your CT (corporate taxes) that you pay to the government. It is important to know that the R & D tax credits ( incentive needs to be filed within two years of the end of the accounting period to which it relates. This means that your company can file claims up to the first anniversary of the filing deadline for the corporate tax return. You need to submit the R & D tax claim in the CT600 tax return form itself. The HMRC details that it is not necessary to file any other form other than your CT600 to file for the R&D tax relief.

How and When to Claim R&D Tax Credits

Good to know facts!

There could be huge expenses that are undertaken when you are running a project that is research and developmental in nature. The risk involved is also very high. But not all costs that are incurred by your business can be covered and claimed under this initiative.

The rates are different for SMEs and large companies. Even companies that do not show any desirable output at the end of the research activity can still claim for the relief from the government. It is also important to remember that if your project is showing losses or it is non-profitable, you can still continue to go ahead and file for the credit incentive from the government. This way, you can save your company from extended losses and use the credit amount to run your business successfully.