This year has seen huge volumes of research and development, especially as a direct result of the coronavirus pandemic. With many people taking 2020 as an opportunity to launch a start-up, there are countless entrepreneurs across the UK who are working hard to develop a new product or service in line with their unique vision.
It’s easy to think that research and development is only carried out by large corporations, particularly those in sectors such as pharmaceuticals and manufacturing. However, R&D can apply to all types of sectors and includes work carried out on products, services, processes and software. This makes it a wide-reaching term that applies to even the smallest businesses, including those that aren’t yet fully formed.
Aaron Gilmore is the owner of TreyBridge Accountants, which works with business owners across the UK. He has this to say about research and development:
“There are so many R&D projects taking place at any given time, from established brands diversifying their product lines, to solopreneurs pursuing a dream. Whatever the nature and scale of your research and development activity, you should be eligible to apply for R&D Tax Credits, which will help you to manage your cash flow more effectively.”
The reason behind this financial support from the government is the sheer importance of research and development. Without it, Britain would immediately fall behind the rest of the world in a variety of ways, as R&D ensures that new ideas become reality and existing products and services undergo continuous improvement. The savings that a business can make through R&D Tax Credits is substantial, potentially opening up new windows of opportunity in terms of growth, lead generation and service delivery.
Aaron adds: “If you’re eligible, you can claim up to 33% of your research and development expenditure. Needless to say, for a large and costly project this will be a significant sum, although it’s just as beneficial for small businesses that need to count every penny. How you use this recovered money is up to you, such as putting it toward recruitment, marketing, larger premises, additional equipment or even further research and development.”
To qualify, a business needs to prove that its R&D activity is designed to create or improve a product, service, process or piece of software. The project doesn’t even have to end with the desired outcome, as all you have to show is that it’s legitimate research and development taking place. The 33% reimbursement will be recovered by your business either as a cash payment or a reduction in Corporation Tax, usually the latter.
Applying for R&D Tax Credits requires a fair amount of paperwork and admin hours but the payback can be extremely worthwhile. If you’d rather have a specialist manage the process on your behalf and ensure optimum results, Aaron invites you to get in touch with TreyBridge Accountants on 01482 235575.