Tightening rules mean R&D Tax Credit specialists are invaluable
R&D Tax Credits are a hugely valuable asset for companies, helping fund innovation and give Northern Ireland a world-class edge in manufacturing and many other industries.
Proof of that statement’s worth comes from HMRC’s own research which found that for every £1 of tax forgone, between £1.53 and £2.35 of research and development is stimulated.
That’s quite a return in anyone’s book and is the main reason why the government is putting considerable effort into raising awareness of R&D Tax Credits.
The payable tax credit in the SME scheme provides valuable support to loss-making companies. It allows companies to claim a tax credit worth up to 33% of the R&D element of their losses and receive an immediate cash-flow benefit.
Because of that, more and more companies realise that much of the day-to-day work which they are carrying out is eligible under the scheme.
Somewhat inevitably, such a lucrative scheme has become a target for abuse in some quarters
To date, HMRC has identified and prevented fraud attempts on the SME scheme worth £300 million in total.
In these cases, companies were set up to claim the cash available through the payable credit in cash even though they had no legitimate R&D activity.
As a direct result, then Chancellor Philip Hammond unveiled new measures to help prevent the misuse of the R&D SME tax relief initiative in 2018 Autumn Budget.
As part of the Finance Bill for 2019-2020, the amount that a loss-making company can receive in R&D Tax Credits will now be capped at three times its total Pay As You Earn (PAYE) and National Insurance contributions (NICs) liability.
This will come into effect for the accounting periods beginning on or after 1st April 2020
Any loss that a company cannot surrender for a payable credit can be carried forward and used against future profits.
This is just one example of how complex the process of claiming R&D Tax Credits can be.
Indeed, given the penalties for incorrect claims can be harsh, in some cases as much as 100% of the tax lost, it can sometimes seem like a gauntlet.
To remove such risk, an R&D Tax Credit advisor with technical expertise in a vast range of sectors to truly understand the detailed processes is vital
A reputable R&D Tax Credit advisory firm should be able to evidence of expert knowledge of the legislation, technical expertise across a wide range of sectors, proven methodologies and robust processes, comprehensive systems that ensure the security of your data and links to HMRC and insight into legislative changes.
They should have a 100% success rate in claims submitted, ethical standards and credibility, previous clients as references and, lastly, should be completely transparent in their fee structure.
At Momentum we welcome a higher level of scrutiny as our approach has always been to apply the highest professional standards to every claim we prepare, resulting in a 100% success rate across more ethan 800 claims with over £125m R&D tax relief approved.
When it comes to navigating the complexities of the R&D Tax Credit scheme, there are none better.