Understanding R&D tax credits can increase chances of investment
Whether looking for seed funding as a startup or conducting your latest funding round to aid expansion plans, you will want to show potential investors that your business is both financially stable and future-proof. While there are many ways to present such qualities, understanding how Research and Development (R&D) Tax Credits work is highly advisable.
What is an R&D tax credit?
In order to discuss the benefits of R&D Tax Credits, we first need to get to grips with what they are and how they can work for your company.
In essence, R&D Tax Credits are a government incentive that supports companies who are trying to achieve a ‘technically challenging’ project. Whether that be the development of a product, process, software or service, if you are spending on R&D, you could be entitled to a corporation tax deduction/refund or, if you are loss making, a cash payment from HMRC.
Did you know...
- More companies qualify than most think
- Average value of a claim is £52k
- Your company can still receive a cash payment even if you are loss making
- Your company can still claim if you have received grants
- You may still be able to claim even if you have been paid to do R&D on someone else’s behalf
But, how can claiming benefit me during he investment process?
Below we have detailed just a few ways conducting an R&D tax claim could position your company as a lucrative, attractive investment opportunity.
Your company’s bottom line
When conducting due diligence on your business, an investor will be particularly interested in your ‘bottom line’; the figure of your profit or loss after tax for each year. While you will have compiled a great deal of documentation and company records, the bottom line on the income statement will be an investor’s first port of call. This is why the more you can claim back in taxes, the healthier your books with be.
This means, claiming back on R&D is a smart move, with qualifying expenditure including wages, agency workers, subcontractors, consumable items, software and much more. However, the amount you can claim back does depend on the size of your business.
An SME can receive up to 33p for every £1 spent on R&D activities, while a large company can claim 9.7p for every £1 of qualifying expenditure.
An SME can claim back up to 33p for every £1 spent on R&D
A large company can claim back up to 10p for every £1 spent on R&D
Position your company as one investing in the future of its industry
Here at LimestoneGrey, we are seeing many different types of businesses from various sectors exploring the benefits of R&D Tax Credits. However, the advantages are much more than just financial. By conducting research and putting time aside to develop a certain area of the company, you are ensuring you are ahead of the curve, remaining relevant in the fast-moving world of modern business. This is something that any investor will want to see, knowing that they can get a return on their investment not just this year, but for many years to come.
Display a strong grasp of your company accounts and entitlements
It goes without saying that R&D Tax Credits are largely unheard of. This is because it is very much a specialist area, with not all accountants understanding the opportunities the R&D Tax Relief Scheme can offer Welsh businesses. By utilising the latest government incentives, you will show potential investors that you boast a sound knowledge of your company finances and what you are and are not entitled to.
Do I qualify?
If you want to find out whether you are eligible to make a claim, be sure to contact us at LimestoneGrey; a firm of Chartered Tax Advisers that specialises in Research and Development (R&D) Tax Credit claims. Taking just a few minutes of your time, we can quickly ascertain what support we can provide to you and your business.
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