R&D tax credits provide lifeline to SMEs

Cash has always been king but in these uncertain times, now more than ever, companies will be looking to maximise their cash flow and a successful R&D claim can provide quick cash injection.

Prime are committed to working with clients on R&D claims across a range of industries, including construction, retail, manufacturing, IT and leisure.  Recent claims secured include a significant cash repayment for one client, which provided them with a lifeline at a time when it was needed most.

So what is R&D tax relief?

The scheme is designed to encourage innovation in the UK by allowing businesses to offset R&D costs against corporation tax.  The relief can be claimed by a wide range of companies who are seeking to make advancements in their field by undertaking R&D.  Companies are often carrying out eligible R&D projects without even being aware of it!

How much are R&D credits worth to me?

Corporation tax relief on R&D is available at 230% for small and medium companies so for every £1 of R&D spend a company could save 25p in corporation tax.  In certain circumstances companies that are loss making or have already paid their tax bill, cash repayments of 33p per £1 of R&D spend is available.  Large companies can also benefit from R&D albeit at a lower rate through the Research and Development Expenditure Credit (RDEC) scheme.  

The added benefit for companies new to the process is that claims can be made retrospectively going back 2 years.

What about COVID?

In light of Covid many businesses are repurposing their activities to meet the demands of the crisis and R&D tax credits could provide cash tax relief for companies using their skills to adapt to and overcome the challenges faced.  

HMRC have announced that they will be providing extra support for SMEs during the ongoing crisis by committing to a 28 day turnaround time for R&D tax credits and relaxing the two year claim deadline for some companies facing difficulties during COVID. 

Care should be taken however that financial support does not adversely impact companies’ R&D claims.  For example both the Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS) can jeopardise R&D tax claims and advice should be taken.

What do I need to do?

If you would like to make a claim for R&D tax credits or would like further advice on what projects may be eligible for relief please get in touch.