When assessing research and development projects, knowing which ones qualify for R&D tax credits can help you plan your strategy and budget. When spending money on these types of projects, it is important to understand how these credits are calculated, and what it could potentially mean for your business. Companies can currently claim up to 33% of their expenditures through R&D tax claims.
There are certain factors that can affect your R&D tax credit claim:
Subcontracting
The rules are different for R&D subcontractors and it depends on the type of contractual arrangement is in place and which scheme they can claim under. Therefore, it is important to understand the different classifications to ensure you receive the credit.
Grants and subsidies
If a grant or subsidy is received on behalf of the R&D project, the qualifying R&D expenses may fall under a large company scheme, even if your company is a SME.
Partnerships
If your SME is a linked entity, it will be counted as a large company under the R&D tax credit calculation. Carefully look at the definition of an SME and the criteria to ensure you fall under the right classification when it is time to do those calculations and receive the highest credit.
How to claim the R&D tax credit Although these are classified as capital expenses, these can also be deducted as current business expenses. To allow this the following must take place:
- Deductions can take place during the tax year where the expenses were paid or incurred
- Expenses may be amortised over a period of not less than 60 months.
This can be a complicated process. The team at GovGrant understands these intricacies and can advocate on your behalf to ensure you meet the eligibility requirements, and can obtain the tax credits you deserve.
