If you’re in the IT sector and run a limited company, you may be entitled to extra funds and not even know about it.
Claiming R&D tax credits can be a great way to improve the viability of your business, but many people assume they won’t be eligible and so never claim.
But how exactly do R&D tax credits work? And how can you be sure your claim holds water?
What is R&D tax relief?
R&D simply stands for research and development, meaning you can reduce the amount of tax you pay if you complete a research project that makes an advance in science or technology.
That project must relate to your existing trade, or one you intend to start based on the project’s results, so you can’t claim relief for any old work.
When we say it has to make an advance in science or technology, we mean it. Not only that, but you must solve a problem no one else has been able to before or be the first to discover a new method that will simplify working systems.
Your project won’t qualify for tax relief if it solves something that another professional could have easily worked out or, of course, if it was already common knowledge.
In other words, your project should be looking into something that nobody is entirely sure is even possible.
To help you understand, a project can be R&D for tax purposes if it:
- develops news systems
- customises or adapts systems
- develops a new product
- devises a new method of production
- develops a new working process.
It will help your chances if your project includes a series of trials, testing and analysis as part of your journey to solve a unique problem.
Why should I bother with R&D?
We’re aware how everything I just said sounds quite complicated, which is why some people assume they will never be eligible or just don’t bother with it.
It’s worth looking at though, for the sake of your business.
There are two main schemes for companies to claim R&D tax relief, the first being the SME R&D relief scheme.
This is open to companies with fewer than 500 staff, a turnover below €100 million or a balance sheet total under €86m, allowing them to:
- deduct an extra 130% of your R&D qualifying costs from your yearly profit, as well as the normal 100% deduction
- claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss.
If you have over 500 members of staff, you’ll need to know about the R&D expenditure credit, which is worth 13% of your qualifying R&D expenditure.
Let’s forget about the tax credit themselves for a moment and focus on what they encourage you to do: innovate your business.
Why would you not want to do that?
After all, whatever you discover could be the key to increasing your efficiency and profitability, giving your business the edge.
R&D tax relief for IT companies
While it’s easy to think of R&D being done in a lab, a lot of advances are done through technology, specifically software development and digital innovation.
One example of a project that may well have qualified for relief was Force Technology’s tool to monitor and transmit structural data of steel structures, which you can read about here.
There may also be opportunities in AI and digital simulation.
The thing is, though, you’re the expert and the one who knows where black holes are in IT.
But with us by your side, you can have the confidence that the tax side of your R&D project is completely taken care of, so you won’t have to be worrying about the ins and outs of the tax relief scheme.
After all, the last thing you want to do is go through all the effort of a research project just to find out it’s left you worse off.
We’ll be there with you from beginning to end.
Don’t hesitate to reach out for a chat about your R&D project.