The Basic knowhow about R
and D tax Credits
The
Research and Development tax credit was started by the UK government to give
incentive to the Small and Medium enterprises (SME) to invest in more and more
research and development work. The government wanted to focus on the SMEs to
help the SMEs prosper and help in the growth of UK. Therefore the Research and
Development Tax Credits was started to let them do more in their respective
fields. The government made law for the SMEs to reduce their tax bill as comparative
relation of their money spent on research and development.
Research and Development Tax
Credits –
- The Research and Development Tax Credits are the returns on taxes to be obtained by the small and medium enterprises for the research efforts in their respective fields.
- The HMRC’s definition of SME is that enterprises where head count does not exceed 500 employees and an annual turnover not exceeding more than 100 million pounds are SMEs. This definition is not accepted throughout UK and therefore the specialist companies need to be approached to get the tax returns.
- Under the R and D law, the government allows an additional deduction of 125 % of the eligible research and development cost, to the SME companies from the tax paid. If the company has incurred a loss, then the government allows a further benefit up to 32.63 % on the eligible research and development investment.
- The rate of R and D credit tax enhancement has increased many folds from 150%, when it was introduced in 2000, to 225% now. Many SMEs do not have the proper know how of the R and D tax exemption benefits and therefore stay back from filling in the forms to claim the tax exemption for their research work.
- The Research and Development tax credits can be an unbelievable source of funding for your business, as up to 33.35% cash repayment can be obtained from the HM Revenue and Customs (HMRC), for the fund used in development and research efforts.
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