Addressing the Misconceptions Of SME R&D Tax Credits: Here’s What You Need To Know

1. Addressing the Misconceptions Of SME R&D Tax Credits: Here’s What You Need To Know As essential as research and development (R&D) is to multiple industries, it is particularly important to small and medium sized enterprises (SMEs) seeking to make their marks. Companies with less than 500 employees fall into the SME category. It is seemingly impossible to ignore the merits of research and development due to its intersectionality across most fields and industries. However, for SMEs, significant benefits that are widely acknowledged are the tax credits small and medium-sized businesses are entitled to. With the intent to encourage innovation and its noted versatility, SME R&D tax credit has never been more necessary. In the simplest of terms, R&D tax credits are tax breaks put in place by the government to assist and encourage businesses which invest in innovation and the improvement of products and services in their industries. SME R&D tax credits, specifically, are tax credits extended to small and medium-sized companies undertaking development and improvement strategies in their companies which can benefit their industries at large. Today, SMEs can receive up to 33% of the amount they have spent on research and development through SME R&D tax credit. Interestingly, albeit sadly, only 5-6% of businesses which qualify for R&D tax credit are claiming it. This could be credited to ignorance about the process and potential benefits they stand to gain; however, more damage is done by misconceptions and misinformation of which businesses and projects qualify, and the general rules of these tax credits. But there’s good news though, understanding SME R&D tax credit has never been easier.

2. The first misinformation to get out of the way is that these tax credits are only extended to successful projects and company. That is simply not true. SME R&D tax credit covers both profit-making and loss-incurring companies and projects. Loss-incurring small businesses can receive between 14.5% and 33% of qualifying R&D expenses, as long as their application is approved by Her Majesty’s Revenue and Customs (HMRC). Another misconception predominant in conversations about SME R&D tax credit involves sectors of enterprise where the tax breaks are applicable. To be clear, the SME R&D tax credit is for every sector of enterprise. Though it is commonly believed that the R&D tax incentives are only provided to tech or pharmaceutical companies, the reality is that all SMEs – from aviation companies to bakeries – are all welcome to apply. Irrespective of industry, a company can qualify if it has been trading for over a year and has a balance sheet of less than €86 million and an annual turnover of less than a €100 million. What’s more, the tax credit can be used for diverse purposes such as buying equipment, paying dividends and even hiring more staff. Considering applying for an SME R&D tax credit? Then it is important to know that there is no minimum limit of R&D expenditure to qualify for this tax credit. In years past, companies could only qualify for R&D tax breaks only after spending £10,000 on research and development; it is this past criterion which has fuelled the present-day misconception. However, since April 2012, this criterion is no longer valid. This served a particular benefit to SMEs as lower spending companies became eligible to access research and development tax breaks. It is important to note that pending litigation issues, late payment of invoices, poor cash flow and lack of significant contracts, serve as examples of some hindrances to an SME R&D tax claim. However, devoid of issues like these, acquiring an R&D tax break should be hassle free. Innovative strategies are encouraged to enable different industries to propel forward in this era of globalization and fast changing technology. There is no doubt that innovation can be a risk- taking endeavour; however, with R&D tax credits, SMEs will not be undertaking these risks alone. Receiving tax credit can be a game changer, helping to propel a business forward. However, it is impossible to deny the fact that making a claim can occasionally be overwhelming. Nevertheless, this is one application you want to get right, leaving no room for errors. When faced with doubt in times like these, it is always worth it to consider hiring the best services

3. available. By simplifying the process and adopting a first of its kind portal, the path to receiving SME R&D tax credit has never been easier, thanks to Areande. With a team of experts available, Areande is designed to offer seamless and innovative ways to claim tax relief. The company offers expertise, technology and professionalism tailored to create a stress-free, dynamic, and enthusiastic experience, streamlining a lengthy process and allowing SMEs claim back as much as possible. Don’t just do it the right way, do it the Areande way.