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Since its inception in April 2000, the government’s research and development tax credit scheme has enabled companies engaging in innovative activities to claim relief on qualifying expenditure. Many more businesses, however, aren’t claiming for eligible projects and are thus missing out on vital funds that could help them grow.
Navigating the intricacies of the claims process and discerning the specific activities that qualify for R&D tax credits may appear intricate. However, the expertise of an experienced accountant can serve as a valuable resource in unlocking compensation for expenses incurred during research and development projects. Partnering with a skilled accountant lithgow or in your local area can be crucial in maintaining accurate financial records and detailing accounting specifics.
This collaboration not only streamlines the claims process but also fortifies the overall landscape of business finance, ensuring that eligible activities are rightfully acknowledged and rewarded through R&D tax credits. Furthermore, your company could rely on accounting Ipswich by Scrutton Bland or similar firms to help you optimize your financial strategy. It can also help you maximize the benefits derived from the government’s research and development tax credit scheme. Additionally, you can avoid costly errors and potential audits by ensuring that your R&D tax credit claims are in full compliance with the established regulations. That said, here’s a brief summary of how to determine whether your activities are eligible.
Eligible R&D activity
The government broadly states that projects which seek scientific or technological advancement in their field are eligible for R&D tax relief. The could mean the resolution of a scientific or technological uncertainty that others have failed to overcome in the past, or that other highly skilled professionals do not readily have the means to overcome. The advancement must also benefit the industry as a whole, not simply provide commercial advancement for the business conducting the R&D.
To help determine if your activity qualifies, you can ask yourself a series of questions, or you could do some research into tax-resolution-services-irs-payment-plans. If the answer to any of them is yes, you may want to investigate the opportunity for claiming R&D tax credits further.
- Is your business setting itself apart from others within your sector through this activity?
- Is there an element of risk or technological uncertainty involved with the project?
- Are you investing time and resources into making processes or products more efficient?
- Are experts in a scientific or technological field employed by you on a project?
Qualifying expenditure
R&D tax credits can be claimed on revenue expenditure, but not on the costs associated with capital assets. Expenses that qualify include:
- Physical materials that are used directly for the R&D project
- Utilities such as electricity and water, that are associated with the R&D activity
- Software obtained specifically for the project
- Employee costs such as wages for staff engaged in the project
Speaking to both technical staff and your accounts team can help you determine what costs are eligible for relief. You can also use an R&D tax calculator to give an idea of the amount you can claim for. Liaising with an R&D tax advisor is, of course, recommended too in order to ensure your calculations are accurate.
Grants
The receipt of some grants, such as the State Aid grant, affect your project’s eligibility for R&D tax credits. If your R&D activity has had grant funding, you may not be able to claim under the SME scheme (aimed at businesses with fewer than 500 employees) and therefore have to claim under the less generous RDEC scheme.
Other grants, however, such as the Horizon 2020 provision, are non-notified State Aid grants, which means you may still be able to claim R&D relief under the SME scheme. Again, seeking guidance from an expert in R&D tax is advisable if you have received grant funding.
