9 May 2023

The UK’s R&D tax credit system is designed to encourage businesses to invest in R&D by providing tax relief on eligible R&D expenditures. In essence, the government is rewarding businesses for taking risks and investing in innovation, which ultimately drives economic growth and job creation. The incentives are available to companies of all sizes and in all sectors, from manufacturing and construction to IT and software development.

In this article, we will take an in-depth look at the UK’s R&D tax credit system, including the eligibility criteria, claim process, financial benefits, and time limits. We will also discuss how accountants can help their clients claim the credits and make the most of this non-dilutive funding opportunity and how FI Group can streamline this often-time-consuming process.

R&D Tax Credits

R&D tax credits in the UK are an example of non-dilutive funding, as they provide financial support to companies engaging in research and development activities without requiring them to give up ownership or equity in their business. These tax credits are a type of government subsidy that is designed to incentivise innovation by reducing the cost of conducting R&D activities.

Working with a specialised consulting firm like FI Group can provide guidance on eligible R&D activities, costs, and assist in preparing and submitting the claim to HMRC. This benfits your clients as we provide them assurance in a year that will see increased inquiries from HRMC into claims.

How FI Group can help accountants clients save time with their claim

  • Identify eligible activities and expenses

FI can help their clients to identify all the eligible R&D activities and expenses, and ensure that they are accurately recorded and documented. They can also help clients understand the rules around what qualifies as R&D expenditure.

  • Develop an effective record-keeping system

FI can work with its clients to develop an effective record-keeping system that tracks all R&D activities and expenses. This can help ensure that the client has a complete and accurate record of all eligible expenses, which can help to maximise the value of the tax credit.

  • Prepare a robust claim

FI can assist their clients in preparing a robust claim for the tax credit, including preparing the technical report that outlines the R&D activities and how they meet the government’s definition of R&D.

  • Plan for future R&D activities

FI can work with their clients to plan for future R&D activities and expenses, ensuring that the client is positioned to maximise the value of the tax credit in the future. This may include identifying potential R&D projects, estimating expenses, and developing a strategy for tracking those expenses.

  • Optimise tax planning

FI can help their clients to optimise their tax planning by understanding how the R&D tax credit interacts with other tax incentives and strategies. This may include identifying opportunities to offset R&D expenses against taxable profits or to reduce tax liabilities through other means.

Common mistakes we help accountants and their clients avoid

  • Failing to identify all eligible R&D activities and expenditures.
  • Not preparing a detailed technical report that adequately explains how the R&D activities meet the government’s definition of R&D.
  • Failing to maintain detailed records of R&D activities and expenditures.
  • Not submitting the R&D tax credit claim within the two-year time limit.
  • Overestimating or underestimating the amount of eligible R&D expenditure.
  • Not understanding the difference between eligible and ineligible R&D expenditure, such as the distinction between revenue expenditure and capital expenditure.
  • Failing to include relevant information, such as details of grants or subsidies received for the R&D activities.

For these reasons, it is crucial to have an expert like FI Group by your side to guide accountants and their clients through the process of claiming R&D tax credits By working with FI Group, you can avoid common mistakes and maximise your financial benefits, ultimately helping businesses to grow and innovate.

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