Steven Mugglestone

The more I learn, the less I know

75% of Accountants Do Not Claim Enough Tax Relief On Behalf Of Their Clients ..… And R&D Tax Credits Is One Such Area

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75% of Accountants Do Not Claim Enough Tax Relief On Behalf Of Their Clients
..… And R&D Tax Credits Is One Such Area

This statistic is quite remarkable, but is being quoted around at the moment.  Rightly or wrongly, it does highlight that many accountants, whatever the percentage is, do not claim all the relevant tax reliefs that are available for their clients.  One such tax relief is R&D tax credit and this is a relief that could result in an actual refund of cash from HMRC, which in the current climate is very welcome.

In essence, Research and Development (R&D) Relief is a Corporation Tax relief that may reduce your company or organisation’s tax bill by more than your actual expenditure on allowable R&D costs.

Alternatively, if your company or organisation is small or medium-sized, you may be able to choose to receive a tax credit instead, by way of a cash sum paid by HM Revenue & Customs (HMRC), but your company or organisation can only claim R&D Relief if it is liable for Corporation Tax. Full details are available on the BIS site below and we have highlighted some of the key points in this article:

The key headline to bear in mind is that you may be able to claim an additional 100% of your costs against your tax and potentially receive a cash refund from HMRC.  Given the statistic above, there are clearly many businesses which do not claim this and so are missing out on potential substantial cash refunds.

Many companies are claiming R&D tax credits successfully, but despite the substantial financial benefits available, many others also do not realise that they have eligible projects or worry that the claim process is too onerous and costly or, most commonly, include the R&D claim as part of their broader tax and accounting affairs without a rigorous effort to optimise its scope.  Businesses need to take advice and consider what they do as they often miss the fact that they are already incurring R&D costs for commercial activities but do not include them as such and so miss out on the relief.

Not only is the tax legislation associated with the scheme a specialised area in its own right, it is unique in that a successful claim is based on its scientific or technological merits, meaning that the claim process cannot be fully handled by tax personnel alone and we certainly work with specialist in this area to assist and our clients with the relevant claims.

Qualifying criteria

  • Attempting to achieve an advance in science
  • Resolution of a scientific uncertainty
  • Technological advances
  • New knowledge – not just for their company

Typical R&D opportunity sectors (but not exhaustive)

  • Companies developing new products
  • Digital marketing – database software development
  • Games companies / Electronics / Instrumentation
  • Food manufacturers
  • Medical devices manufacturers
  • Technology industries e.g. aerospace
  • SMEs with a reasonable number of employees
  • Software – security, performance, packages together to make a system
  • Software development

So the question really, in respect of R&D Tax Relief – is your company claiming it’s full entitlement?

·         Do you employ scientists, engineers, software developers or technicians?

·         Have you developed a new or appreciably improved product or process?

·         Have you developed software in-house?

·         Are you a Small or Medium-sized Enterprise (SME) that has subcontracted out any of the above?

If the answer to any of these questions is ‘yes’, and you are a UK Corporation Tax payer then you could be eligible to claim R&D tax relief.

The benefit can be a cash credit to your business that is worth as much as 25% of your company’s expenditure on Research and Development. In short, if you employ only four engineers or software developers performing eligible  work at £25,000 each, under the UK R&D Tax Credit scheme you could be entitled to a cheque from HMRC for £25,000 each year.

We have been Finance Directors within business and involved in similar claims from the other side of the desk and we carry out this type of review for our clients on a regular basis to ensure that we understand what they are doing and picking up where eligible R&D is being carried out to ensure that the appropriate claims may be made and where we can, cash refunds obtained on behalf of our clients.  We are always endeavouring to ensure that we are firmly in the 25% of accountants that do claim all relevant tax reliefs for their current and future clients.

Steven Mugglestone BA FCA,
Finance Director Services
McGregors Corporate, Entrepreneurial Chartered Accountants and Business Advisers
…….Really good for your business

McGregors Corporate are a Member of Probiz Tax, providing Innovative Tax Solutions to Owner Managed Businesses.

T: 0845 519 5659                T: 0121 236 3317

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Written by Steven Mugglestone

November 30, 2011 at 1:16 pm

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