14 Quick wins to get EVEN MORE money back in your next R&D claim
Remember that feeling when your first R&D tax refund hit money hit your bank account? Well, we want you to feel this every time you make a claim!
How? By making sure you are prepared and maximising every R&D claim.
To help we have complied 14 quick wins to optimise your R&D claim. From missed expenses, to record-keeping, to choosing the right R&D scheme; even the way you are paid!
We’re confident there will be something new to consider, starting with expenses….
Here’s seven examples of costs that are commonly missed in R&D claims:
Easily overlooked and often misunderstood. Subcontractors working as a third party in R&D for a large company can claim expenses under the RDEC Scheme.
You might not be aware that rent cannot be included in your R&D claim…unless it is bundled into a package with say your utilities. If your circumstances change, make us aware, as this could make part of your rent claimable.
The best advice for staff costs is to keep a record of all staff involved in R&D projects (technical or not). They might not all qualify but if there are supporting roles involved you may be able to claim money back for your business.
Many businesses fail to include the planning stages for R&D projects, thinking it only begins when the materials costs kick in for example. But an R&D project doesn’t just start. There is always an element of time invested into preparatory work. Include it.
It’s vital to get a grip of good record-keeping for R&D projects, as it can really improve your R&D Tax Relief claim, leading to more money back and a robust audit trail.
A quick win for record-keeping is to follow these three steps to see what you are doing at the moment and where there could be improvements or modifications:
STEP 1 – Identify the records you can be confident in
STEP 2 – Then determine where you are estimating
STEP 3 – Tweak your systems to give greater confidence
To claim R&D you need to be a limited company, within the scope of corporation tax (but note you don’t actually have to be paying it i.e. loss making companies can claim). There are then a few things you should consider towards ensuring your claim is maximised.
Salaries can be included in your R&D claim, BUT dividends cannot. If you are a Director – heavily involved in R&D projects – taking a small salary and much higher dividends, it’s critical to revisit how you are paid to maximise your position personally and for the R&D claim.
Companies face several pitfalls if they do not plan correctly.
For businesses that are global, you can only claim for UK-based company R&D expenditure. Bearing this in mind, you need to think about where the R&D takes place within the group – who leads the R&D? Who employs the staff involved in R&D? There are some exceptions where you can recharge costs, but not all roles will qualify.
If you are a small company operating within a large group, you should consider the benefits of accessing the higher rate of relief from the SME R&D Tax Relief Scheme.
If you’re looking ahead to your next R&D claim, book in a scoping call here and let’s make sure you are ready to take your claim to the max.
A blog by Telfords Accountants