I’ve incurred substantial expenditure in researching and developing new products and processes for my company. Can I get additional tax relief via tax credits for this cost?
In principle, yes, but, first of all, you need to answer the following questions:
- are you creating, or attempting to create, any innovative new products, services, systems or materials?
- are you developing new processes for manufacturing or other business processes to gain competitive advantage?
- are you taking on development projects where there was uncertainty, the work is experimental and you take the risk?
- are you designing, installing and trialling bespoke engineering solutions or projects?
- do you have failed projects of the above types?
- Do you consider that the ‘solution’ cannot be readily identified by a competent professional?
- Is this a significant development and not ‘trivial work’ ?
If you consider that you can answer these questions to your satisfaction, then you may be able to claim for Research and Development Tax Credits from HMRC. You will be able to claim an additional 125% of any identified and agreed R&D expenditure within two years of the financial year end in which they were incurred.
If your business has tax losses, it will be able to claim a cash refund equivalent to over 20% of the expenditure identified, or carry forward those enhanced losses to reduce corporation tax bills in future.
If your business has chargeable profits, then these profits can be reduced by 125% of the expenditure identified, resulting in a lower corporation tax bill (and repayment if tax has already been paid) and / or revised tax losses to carry forward as above.