Recently we celebrated hitting £15m mark in terms of savings we’ve made for our clients through handling their Research and Development (R&D) Tax Relief claims. To top it off, we’ve also achieved an unbeatable 100 per cent success rate with every R&D claim we’ve made so far.
Our clientele isn’t made up by scientists but varies from start-ups to breweries, manufacturers and IT specialists. Here we bust five common misconceptions business owners have about R&D and their eligibility for the relief.
1. R&D is just for people in lab coats developing the next cancer busting drug
This is the most popular myth and holds back many companies from maximising their revenue. Often the claims we handle come through our knowledge of a customer’s business rather than them approaching us direct – simply because they don’t consider what they do innovative.
For example, food businesses often don’t realise that tweaking their recipes through trials and experiments would qualify for R&D.
2. Dividends are the most tax efficient way to pay directors or shareholders
Although dividends are a tax efficient option in some instances, it isn’t the best option for businesses eligible to claim R&D relief. If a director is performing R&D work and receives £100,000 in dividends – this money wouldn’t be eligible for an R&D claim. However, if the director received the same amount of money as a salary it would be eligible for the relief.
3. The most significant proportion of an R&D claim is nearly always staffing costs
The relief that’s available differs amongst sub-contractors and permanent staff. When it comes to sub-contractors, it is reduced to 65% of their salary. This could equate to a significant difference when claiming R&D relief as 100% of permanent employees’ salaries are eligible for R&D relief.
4. R&D tax relief is available regardless of business funding
This is a common misconception, but we encourage business owners to consult financial advisors before accepting government grants, whether these are EU or UK wide. This type of funding can disqualify an entire project from being eligible for R&D relief, which is often greater than the grant itself.
5. R&D tax relief claims are tax avoidance
Often SMEs think that R&D tax relief claims must be a tax avoidance or tax planning schemes so don’t make a claim. However, neither is the case. R&D tax relief is a statutory relief. If you’re performing R&D work, you’re entitled to claim the relief.