R&D Tax Credits
Is this scheme for real?
It certainly is. The R&D tax credit scheme iis the UK government's scheme to reward innovation in business and was introduced in 2000/01. It is one of the most generous funding schemes available for business. The most recent annual HMRC Report shows the average SME obtained £53k credit and the average Large Company £272k.
£3.5bn was paid out in the last reported year alone.
Can my accountant do my R&D Tax Credit claim?
Yes they can, but Business Cash Enabler provides a totally different level of service via a technologist-led approach. Each client will have a technical analyst assigned, such as a scientist, engineer or software specialist, who understands the client’s technical environment, to ensure that all qualifying projects are identified and claimed for. This approach invariably achieves around 100-200% increase on a claim that may be submitted via a client’s accountant. However, a client’s accountant will be kept in the loop and provided with all reports generated for submission to HMRC. Business Cash Enabler and its partners are not rival accountancy firms and do not take on any tax compliance work.
We don't do R&D
This is one of the main reasons that businesses have not claimed, due to a misunderstanding by them or by their professional advisors as to what constitutes R&D for the purpose of tax credits. If you carry out any activities that are close to the list below, we urge you to seek advice from Business Cash Enabler:
- Designing and producing new products
- Regularly changing the way you make products
- Developing or improving manufacturing processes or services
- Developing or integrating software, IT solutions or products in-house
- Have invested in failed projects or developed products not launched
- Employ any staff with a technical or scientific background
- Developed or improved materials or devices
- Developed samples, prototypes or undertake testing
Can we get a cash-back for R&D as we don’t pay corporation tax?
Certainly! As long as the company has qualifying activities and incurred costs for the same, it can obtain a cash-back, potentially year-on-year - even if it has never paid corporation tax!
To qualify a business must be a UK registered company and have been trading for at least one year with a set of trading accounts available. A company should be operating a payroll and/or paying for subcontractor labour for eligible activities.
How long does it take to obtain an R&D credit or cash-back?
The whole process generally takes around 8 weeks. HMRC R&D credits typically pay out within 30-42 days of a claim being filed.
How much could an R&D Tax Credit be?
In the latest report from HMRC, the average Small Medium Enterprise business received £53k for one year and the average credit under the Large Company scheme was £272k. A company can claim back for the prior two years for a first time claim and each qualifying year thereafter.
Will this process cost us if we aren't succesfull with a claim?
No. The claims management process works on a no-win-no-fee basis.
How likely is it that our claim will be approved and paid?
The service provided via Business Cash Enabler has been 100% succesful to date since starting out in 2006, with payouts on over £160 million in claim values.
What size companies does Business Cash Enabler work with?
Any UK entity registered for corporation tax purposes, from small family owned businesses to large PLCs. The specialist provider that Business Cash Enabler works with, has around 80 persons involved in the R&D claims management process, providing much more resource than the largest accounting firms in the UK. Client case studies include family owned businesses that typically obtain in the range of £20k-£70k cash credit (double for a first time 2 year retro claim). Large companies with heavy investment in innovation may receive hundreds of thousands of pounds cashback or credits.
I thought our accountant had claimed all capital allowances?
Your accountancy firm will of course claim for items each year for which there has been a proof of purchase, however, Business Cash Enabler provides service via RICS building surveyors who will identify a range of fixtures and fittings and plant and machinery embedded within the building, for which there were no invoices or bill of materials. The surveyor will itemise and value these using methods approved by HMRC and the expenditure identified will generate tax relief at the tax rate paid by the owning entity or person/s at their relevant tax rate.
How can I know if my accountant has claimed?
Do you ever recall a qualified building surveyor assessing the property, producing a report of embedded items and providing a separate valuation for land and the cost of rebuilding at the time of purchase? If you don't, it's likely these items haven't been claimed for, unless a previous owner claimed. The Business Cash Enabler service will be able to check as to whether an historic claim was made by a prior owner, at no cost to you.
What are the qualifying criteria?
You need to own the freehold of commercial premesis, or to have paid a capital sum for a long term leasehold, and/or you paid for and own any qualifying items installed in a refit or refurb. The owning entity or person/s should be UK tax payers.
Is there a cost to find out if we are eligible?
Not at all. The service provided via Business Cash Enabler will provide a completely free of charge eligibility service, from checking land registry details, ascertaining the property owner's tax profile, prior owner claims, and compliance with the latest tax legislation. A case will only be taken on if it can be confirmed there is a valid claim to make and the fee is simply a small percentage of the value identiied, invoiced only after the full report for submission to HMRC is complete.
Is it worth claiming?
You will have to be the judge of that, but many property owners are obtaining a healthy six figure tax relief, comprised of tax rebates and reduced tax liability over several following years. As a rough guide across all commercial property types - take 25% of whatever the property was purchased for and/or of any costs for major renovation or refit, then multiply that by your tax rate. That will give you an indicator of potential claim value.
Is there a minimum property value?
Unclaimed capital allowances relief may be possible for commercial property purchased at any price. However, Business Cash Enabler helps property owners where the property portfolio value is £500k or above (purchase price, whenever that was in the past, but not current market valuation) and/or the cost of major refurbishment or refit, when combined with the purchase price, is £500k or above.
What do we need to do to make it happen?
Simply contact Business Cash Enabler and you will be given an indicator as to the liklihood of a potential claim. If everything appears in order, a consultant will visit to confirm details and ask you to sign some consent forms to make some background checks. No money is taken. After a due diligence process you will be advised if a claim is possible and a building surveyor's visit will be necessary.
How long will it take to get unclaimed relief or cash-back?
Assuming all background checks can be made promptly with relevant informtion being obtained, a report should be ready for submission to HMRC within 8-10 weeks from commencement.
Do I get the full amount of relief paid out at once as a cash pay-out?
Not usually, due to two factors - an Annual Investment Allowance (AIA) and a Writing Down Allowance (WDA). The AIA allows you to claim up to a certain level each year, for expenditure incurred within the year, and the WDA covers other qualifying iitems identified, upon which relief is given at an annual writing down rate. Currently these rates are 18% for most qualifying items, or a special pool writing down allowance of 8%.
The most common scenario is that a claimant will generate tax rebates from the re-submission of the prior two years tax returns and the balance of relief will be carried forward and spread over several years, thereby reducing tax liability until the benefit is exhausted.
Who is eligile for this?
Any UK Company liable for Corporation Tax that holds interests in qualifying product or process patents whether owned or exclusively licensed can elect into the Patent Box regime.
What are other qualifying factors?
The claiming UK Limited Company needs to have undertaken the qualifying development on the patent and the patent needs to be registered in the name of the UK claimant company.
Companies must “scheme elect” to substantiate their claim within the rules of the scheme and actively claim their Patent Box benefit in the company’s annual Corporation Tax return.
You will need to identify and calculate the scheme qualifying profits realised from your company’s qualifying IP (patented product) income.
What's it worth?
Patent Box can create a profits deduction or a reduced tax rate on patent income.
100% relief is available from the 2017/18 tax year. For the 16/17 tax year the relief is 90% of the full benefit.
What if we are claiming under the R&D Tax Credit scheme?
R&D Tax Credits can be claimed in
addition to the Patent Box, enabling many companies to benefit from both schemes!
What if our patent is only a small part of a product?
Even if the patented element of the product is minor, 100% of income arising from the product could still fall into the scheme.
What if we have patents pending?
Profits generated from scheme qualifying product sold during the patent pending period qualify for the Patent Box following patent grant.
You can elect into the patent box scheme whilst your qualifying patent application is pending as the election date starts the date of relief, however you can normally reach back 1 year following the filing of the relevant tax return.
What if my company is loss making?
Some companies making a trading loss find that the patented products in their portfolio make a profit. Profits from relevant patented product can be carried forward and offset future years' patented product profits under a Patent Box scheme claim.
What's the benefit of using a professional consultancy?
Some companies are not claiming at all, when they could. This is not tax compliance and therefore may been missed as part of annual compliance.
The calculation to determine and optimise your Patent Box deduction requires a detailed understanding of the scheme and how income and costs are attributable under the regime, which is why many companies and their accountants work with a specialist to maximise the relief they should be gaining.
How does the process work?
Step1: To help you value your IP, a Product and Process IP audit is conducted on your business, to include:
- Identifying qualifying patents and recommending strategies to ensure your current IP qualifies.
- Advice on commercial adjustments to maximise your % of qualifying sales.
- Mapping your sales by qualifying and non-qualifying IP.
- Reviewing your R&D Tax Relief claims to identify opportunities to maximise both schemes.
The report is in itself a valuable audit
of your intangible IP assets.
Step 2: We handle your Patent Box claim:
- Preparing the necessary Technical and Financial election claim report.
- Maximising your Corporation Tax reduction.
- Recommending ways to maximise future claims.
- Work with your accountant to file your claim with your Corporation Tax return.
- Manage any HMRC queries regarding your claim.
Ensuring you gain full benefit from the scheme from the start.
Contact us for a no obligation meeting to see how you could benefit from the PATENT BOX