If your business is struggling with cash flow, your research and development programme is probably the last thing on your mind.
But what you may not realise is that the tax relief you get for R&D activity could be the vital lifeline you need to keep the money coming in.
A lot of firms are investing in R&D, but many don’t realise that the activities they are already carrying out could generate a sizeable tax break that could be re-invested back into the business.
The UK government has set aside an annual budget of over £2 billion in a fund that offers tax relief to small and medium-sized companies (SMEs) undertaking R&D.
Many companies are already investing in R&D, but new start-ups may find they are burning through their initial capital very quickly – especially those in the tech and manufacturing sectors.
So, extra money for activities that they are already carrying out could be a godsend. In some cases, the difference between keeping the lights on and a business having to close.
Even if your company is making a loss and doesn’t have corporation tax liabilities, you can make retrospective tax relief claims based on the last two completed financial years.
Additionally, if your SME is in a tax loss position, you can surrender part of the loss attributable to the R&D expenditure for a cash payment.
At the moment, the amount of credit given is 14.5% of the relevant expenditure and the company must forgo the tax losses.