Step 1 – Maximise your R&D Claims
Expenditure on materials and consumables used for the development of prototypes are eligible for R&D tax claims. However, any materials consumed as a result of the development of a first in class prototype, which is then sold on, are not. Anything that has been scrapped or transformed during the R&D process as a result of failed prototypes are eligible.
If consumables, such as light, power, or heat, are transformed in the process, they can be claimed for. So if your team work in an office, a % the utility bill can be included in your tax credit claim.
Maximise your R&D by claiming costs associated with subcontractors or EPWs. Many companies still claim exclusively on internal costs. Subcontractors or EPWs involved in related activity qualify as R&D expenditure.
Subcontracting and unconnected EPW costs qualify. However, only 65% of the costs are considered. Up to 100% of connected EPW costs can be considered.
Include your revenue expenditure on computer software licenses purchased for research and development activities.
Include software licences purchased for everyday tasks used partially for the purpose of your R&D projects, eg project management software.
Many companies focus their claim on their direct staff. R&D allows you to claim on the job titles and roles listed below:
In order to maximise your R&D claim from a technical perspective, it’s best to have technical teams talking to technical teams. FI Group, like many specialists, employs technical consultants. These consultants have studied or worked in research and development innovation areas. These areas include, for example, software development, engineering or science-related subjects at university. The FI team has often held jobs in these technical fields before becoming a consultant.
The HMRC definition of what qualifies is ambiguous. FI Group ensures we have a deep, technical understanding of your projects. We discuss and understand all R&D qualifying projects and link them to the definition. It is also the role of our consultants to write up a technical narrative report that HMRC would love to see.
HMRC look for companies who have the financial risk on projects to make the claim. What many companies don’t realise is that this doesn’t always mean it’s the company directly paying for, or commissioning the work. If you undertake research and development work for a client, you can still claim funding in one of two situations.
Step 2 – Using R&D as more than a Cash tool
At FI Group, we speak with companies every day, and there’s common theme behind every conversation. Once a year, R&D tax allows them to inject additional money into the business. For some, it allows them to add additional information into their cash-flow model.
We are working alongside companies to implement a real-time approach to R&D. This will provide quarterly updates on their benefit in real time. It will also present extra information and allow them to predict cash-flow up to 18 months in advance. We have developed a methodology that is more time-efficient, and yet still feels like your current R&D process.
A better understanding
of when to invest
An updated cash
In the business world, private equity funding is one of the best sources of raising funds to grow your business. When raising funds, one of the most important things to have is a detailed business plan and financial forecast. We talk to companies about the relationship behind R&D tax and forecasting. We also help you understand how the R&D process demonstrates to investors you have a handle on your financials.
For large companies or an SMEs funded by private equity, or if you are considering private equity, then please get in touch. We can help you to understand better, how research and development tax credit can become one of your best friends.
You may already have a presence in locations around the world. Or you might be taking the first step in your global journey. If either of these applies, then you should consider the impact of R&D funding and how your company structure is set up.
The UK has a very attractive R&D tax scheme. However, other countries have safer and more attractive schemes. Such schemes could present greater relief on your day-to-day activities. If you claim R&D in the UK and want to take it to the next level and look to expand internationally, please