We all have a lot of bills to pay at this time of year, and companies with March year ends can add paying their corporation tax to that list, with the tax for the 31 March 2019 year end due by 1 January 2020. Government statistics indicate that many of these companies in our region will be OVERPAYING their corporation tax as they won’t have taken advantage of the significant savings arising from claiming R&D tax credits, and even those companies which have submitted R&D claims may not have maximised the potential savings. Have you checked whether your company is accessing the relief it is entitled to?
The Government produces statistics each year on the uptake of the relief, and despite increases in popularity each year, HMRC believe the relief is still underclaimed. The most recent report indicates that only 7% of all claims made, and 4% of relief paid out, goes to companies in Yorkshire and the Humber– this low percentage is a further indication that more companies in our region should be accessing this relief. In addition, the latest statistics show that 18% of claims made are for savings of less than £5k; this is contrary to our experience working with companies across our region, where typically we see savings around the £30k+ mark.
If your company is only making a relatively small claim, it may be worth revisiting this to confirm.
One reason eligible companies miss out on this valuable tax saving is because of a lack of clarity around qualifying R&D activity, with business owners overestimating the level of innovation required to claim. Projects qualifying for R&D relief include those seeking an appreciable improvement in science and technology and this can often be seen where a company is developing or modifying a product or manufacturing process.
The following can be good indicators that R&D activity may be taking place:
- where a company is employing technical staff to work on technically challenging projects,
- where you take on work for clients without knowing exactly how you are going to achieve their demands
- using science and technology to duplicate existing products and processes, but in a fundamentally new way, can also be R&D – e.g. improving a process to reduce waste, or energy consumption
The development does not need to be ground-breaking – the term ‘appreciable improvement’ is used, which means a development which an expert in the field would acknowledge as being significant – Version 1.2 can qualify just as much as Version 2. R&D occurs in many different industries - Radius has recently submitted claims for companies involved in manufacturing, software development, engineering, construction, bio-energy, pharmaceutical, food tech, clean tech, agriculture, health science and all aspects of the rail industry (this list is not exhaustive!).
Our Eligibility Checklist is a good place to start if you are not sure whether your company qualifies, or just pick up the phone to one of our team.
A company has two years to make an R&D claim so for those with March year ends the deadline for making a claim for the March 2018 year end, or indeed revisiting any claim made for that year with a view to further maximising this, is fast approaching – 31 March 2020. However, if you act quickly there is plenty of time to undertake a thorough review of your eligibility and to prepare and submit any claims due.
And if you would like to reduce one of those bills which you’ve got to pay this month, or indeed would like a repayment from HMRC where you have already paid your 2019 corporation tax liability, get in touch with one of our expert team who can quickly establish whether this is something you should explore further.
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Our dedicated tax planning team regularly help clients with tax planning ideas. If you require any advice, then begin your journey with us today; drop us a line and let's start talking about how we can save you tax.
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