Underclaimed Limited Company Tax Credit Could Help Thousands of Businesses During Lockdown Recovery

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Innovative businesses, both large and small, are hungry for funding to assist them as they emerge from lockdown and begin their recovery. While the Government has offered several loans and grants to COVID-stricken businesses, there is an existing tax relief that remains largely unclaimed. Daniel James Tax has developed an online tool for UK companies to check their eligibility online.

Innovative businesses, both large and small, are hungry for funding to assist them as they emerge from lockdown and begin their recovery.

While the Government has offered several loans and grants to COVID-stricken businesses, there is an existing tax relief that remains largely unclaimed.

Since R&D Tax Credits was made available in 2000, £33.3bn has been claimed in tax relief. Each year sees an increase of over 15,000 new applicants; however, it is estimated that only 1 in 5 companies that are eligible to claim for R&D Tax Credits, do. This can result in companies missing out on well needed funds since the scheme allows you to claim R&D Tax Credits for your last two completed accounting periods (2 years).

There are multiple reasons why R&D Tax Credits are underclaimed:

  • Negativity from current accountant not fully understanding the scheme.
  • Confusion over what qualifies as R&D.
  • Lack of publicity of the scheme.

Whilst R&D is initially confusing, it can be described as any piece of work that requires a limited company to create a new product or process that is not immediately obvious, examples such as this will likely qualify for the relief. Failed research and development projects also qualify for Research and Development Tax Credits.

Examples:

Adaptation of technology from one industry for use in an industry it had not been designed for.

Have you used or combined technologies in new ways?

Were there any failures in product or process development or improvement?

Have you developed a new or changed product, or process, that has characteristics substantially different from those currently available (i.e. more efficient, robust, flexible, less expensive, etc.)?

Streamlining manufacturing process through automation.

Integrating new materials to improve product performance and manufacturing process.

Major improvements in packaging e.g. to enhance shelf-life of the contents.

The average R&D Tax Relief claim is £54,000 so it is worth exploring to see if your business activities qualify. Daniel James Tax Ltd has launched a new R&D tax credit online eligibility checker (https://danieljamestax.co.uk/rd-tax-credits-eligibility-checker/) to determine whether a UK company can qualify for R&D tax credits, the tool also provides an estimation of the amount of tax credit that could be received.

¹https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/921817/Research_and_Development_Tax_Credits_Statistics_September_2020_accessible.pdf

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James Duffy
Daniel James Tax
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