Tax Relief

Firms can profit from tax breaks for analysis and improvement

Careful planning is of the utmost importance to ensure that this R&D advantage is used in the most efficient way

The COVID-19 support measures are coming to an end and many companies will be exploring options on how they can positively impact their cash flow. An important aspect for companies should be the tax break for research and development – a generous relief for companies that continue to invest in innovative activities.

In general, to qualify for R&D tax relief, the project must achieve scientific or technological advancement by overcoming scientific or technological uncertainties. The R&D definition may make companies think that the activities they are performing are inappropriate, but in our experience, clients often fail to see the potential for R&D in their work.

For qualifying companies, a tax break for research and development can result in significant tax savings or cash refunds. The benefits of R&D can vary widely depending on the application of the relief. Careful planning is of the utmost importance to ensure that this R&D advantage is used as efficiently as possible. There is a misconception that research and development tax breaks only benefit profitable companies, but loss-making companies also have a number of options, including the option of cash repayments.

The corporate tax rate will rise to 25 percent by 2023 – which makes the relief even more valuable. To get the best result, planning your research and development tax breaks is critical.

The savings come at a significant cost to the government and so laws are passed regularly to counter abuse of the discharge. Recent figures suggest that £ 311 million annually is overwhelmed by errors and fraud. To address this, the HMRC is employing more staff to review R&D claims and we anticipate an increase in HMRC inquiries about R&D claims.

The UK government is incentivizing businesses to increase their investment in innovation and attracting talent to the UK and has recently announced plans to expand the level of qualifying costs but will seek to limit the relief to UK R&D activities only . This, coupled with the complexities and limitations of performing calculations, underscores the importance of an R&D tax advisor who understands your business and can help you navigate the complex world of R&D tax relief.

Azets’ team of trusted business consultants are available to provide research and development tax breaks and assist companies applying for research and development tax breaks. To discuss your business activities and a possible research and development tax break, contact [email¬†protected] or call 01 224 581 288.

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