12 Apr 2016
Research and development tax credits are available to businesses in every sector – including yours.
Mark Tighe
Job Title
The Government's RD tax credits offer an incentive to pioneering companies for developing new, and improving existing, products.
Ultimately, what matters is not the size of a company or the sector, but that the company in question is developing new products, services or systems – or materially improving existing ones. If it is, then research and development (RD) tax credits are available.
For example, an online supplier of veterinary products recently instructed our business to carry out an audit of potential RD activity it had undertaken.
After carrying out a detailed investigation and identifying qualifying activities, we built up a profile of costs incurred by the supplier and sent a full breakdown to HMRC for assessment.
The costs identified (amounting to about £57,000 of RD-related expenditure across two years) included the design and development of a sophisticated software system that allowed for more advanced stock control management, mapping of product listings, pricing and marketing.
Within a couple of months, the owner received more than £14,000 of tax relief (approximately 25% of the total RD costs) for the 2013 and 2014 tax years combined.
RD tax credits are the Government’s way of rewarding innovative companies for developing new, or appreciably improving existing, products, processes, systems and materials. They are, effectively, an incentive for pioneering companies that are increasing the UK’s wealth creation capacity.
Importantly, RD tax benefits only apply to those businesses liable for corporation tax. They can help to reduce a corporation tax bill or be claimed as a cash sum as a reimbursement from the HMRC due to an overpayment of tax.
Types of qualifying RD expenditure include staff costs and agency workers, software, travel costs, utility bills such as power and water, certain payments to subcontractors, and costs involved in creating a prototype.
In 2014, total expenditure on RD carried out by UK businesses rose by 6% to £19.9 billion. Worryingly, HMRC figures show less than 1% of UK companies eligible for RD tax credits ever make a claim because of their complexity and the constantly changing legislation in this area of tax.
We’re not talking pocket change here – our average claim is in excess of £42,000. In some cases, the tax relief available to the claimant can extend to approximately 30% of the initial investment in RD undertaken by a business.
There are many other areas where vets could potentially claim, such as:
What’s also important to point out is the development does not need to be successful, the practice owner could still include this activity in his or her claim.
It’s worth pointing out most RD tax relief firms operate on a “no win, no fee” basis and only charge a fee once the tax benefit has been identified. This means there is usually no risk and no up-front cost for the practice.
However, it is important any veterinary practice that thinks it might be eligible to claim RD tax relief acts quickly.
RD tax claims can only go back two tax years, meaning they must be made within two years of the expenditure being incurred.
Remember though, as long as RD activity is being undertaken you will be eligible to claim each year.
