What are R&D Tax Credits?
Research and development (R&D) tax credits are a form of government tax relief designed to encourage more UK businesses to invest in science and technology innovation.
The scheme is becoming increasingly popular, with the number of claims jumping 22% in 2015-16. During that financial period, claims worth a total of £3.7 billion were approved.
But did you know that half of the UK’s 5.7 million businesses are considered innovation active? With only around 43,000 claims each year, that means hundreds of thousands of enterprises could be missing out on lucrative R&D tax credits.
Defining Research and Development
The UK has always had a reputation for innovation and invention, so R&D tax credits are intended to help companies build on and contribute to that legacy. Effective R&D not only allows a business to grow, but also helps advance understanding and solve problems across an industry.
For your work to count, it needs to take place as part of a project related to your company’s trade. It might involve creating a new product, process or service, or you might be improving on an existing one.
HMRC provides a list of questions to ask yourself when trying to determine whether your project qualifies for R&D tax credits, including:
- What uncertainties were encountered?
- How were the uncertainties overcome?
- Can another professional offer the solution?
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