CAN UNSUCCESSFUL PROJECTS CLAIM FOR R&D TAX INCENTIVES?
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One of the major misconceptions regarding the R&D Tax credits includes its availability for unsuccessful businesses. But, in reality, the companies that are at loss can claim more relief than the profitable companies. That’s right! Losing SMEs often have multiple options while claiming for the R&D tax credits and R&D tax relief.
Funding for Failed R&D Projects:
One of the very convenient ways to sustain your business model is by focusing on the failed R&D projects. This way company can explicitly drive the profitability margin in a positive direction and increase the value. On the other hand, learning from the failed R&D projects helps you to apply different strategies and become successful in a shorter period of time.
The R&D tax credits enables you to analyze the drawbacks of your failed projects and mark your shortcomings. The results are quite astonishing as you get the complete picture of a successful business model out of your mistakes.
Every single idea you learn from your past experience becomes an innovative investment towards a successful business. It allows you to take risks when you have already experienced a failure but ready to use it as a weapon to grow your company.
What are the qualifying costs for R&D Tax Credits?
There are qualifying costs for businesses claiming R&D tax credits. This cost includes the labour costs consisting of the travel costs, utility costs, employers NIC, and pension contributions and subcontractors.
The number of businesses claiming for R&D tax relief has been increasing for the last 2 years. According to the stats, there are still many eligible businesses present that are still pending R&D claims.
The value of R&D claims for unsuccessful projects:
Even the failed R&D projects are a great source of valuable information. Most of the successful projects and businesses have faced some kind of obstacles and failure along the way of their success. Even though the possible failure is a huge risk but the R&D tax relief and insurance companies help to make sure that the companies stay up and moving towards success.
This is one of the main reasons for the establishment of R&D tax relief to help lessen the effects of potential failure faced by the projects. In order to strengthen the R&D claims, many companies are working side by and providing consultancy throughout the process.
In these times, the risk of potential failure is huge stress but at the same time, the great revolution is also taking place. The continuous development by the blend of old and new ideas can give a whole new texture to your business and help it get ahead of the customs.
Cash from R&D tax credits:
Any failed SME can get a tax credits up to 33p for every £1 spent by the company. In other words, if the total money spent is £1oo, ooo, then the R&D tax relief worth £33,350 can be claimed. This is also possible even if the company never paid any corporation tax before. The more you go back with R&D claims, you will get more R&D tax credits covering the loss with the same percentage.
R&D Tax Relief for Loss-making Companies:
The rules of SME Research and Development R&D Tax Relief are the same for the companies who either pay corporation tax and for those who don’t. Loss-making SMEs with R&D claims are given a choice. They can get R&D tax credits covering their loss if they agree to give up their R&D losses in the year, or they can continue their losses to compensate for the future profits, or they can choose the combination of these two reliefs.
The rate of R&D Tax Credits is far less than the Corporation Tax, around 14.5% versus 19%, but the best point of the R&D tax is that it is totally money back from HMRC now and it is totally set against paying less tax in future.
There are many businesses that are eligible for the R&D tax credits but the ratio of the R&D claims is significantly low. The reason being the same i.e. the failure in the business and failed ideas but you are still eligible for the R&D claim and can easily get benefit of the R&D tax relief using simple terms and conditions.