£750k back from the taxman. Who’d have thought it!
Posted on: 19/08/2021
A printing business received over £750k over ten years via the HMRC Research & Development tax credits scheme.
Many businesses will have been looking to take advantage of any government grants or loans available during the Coronavirus. However, an annual cashback for innovative businesses has been available for the last 20 years and has the advantage of being a means of funding that doesn’t have to be paid back.
Rob Sowden, innovation tax incentives consultant operating from Bournemouth, provides the following example:
“The consistency of the government support via the Research & Development (R&D) tax credits scheme is really showcased with this business. The scheme was introduced in 2000/01 to reward companies for innovation, to ensure the UK remains a thriving and rewarding place for businesses to trade in. This business received a consistent average in excess of £75k cashback annually for a decade. This cashback is not taxed again, it goes straight to the bottom line. Many businesses and their advisors often associate the R&D tax credit scheme with sectors such as manufacturing, engineering, pharmaceutical, etc, yet this business in the sector of commercial printing highlights that a business in any sector can obtain this valuable cashback. However, it does take a specialist claims provider to correctly identify the nature of qualifying activities to ensure that the company obtains maximum entitlement and to avoid the risk of submitting a DIY claim directly (or via an accountancy firm), that is not compliant with legislation. On this latter point, it is important to recognise that HMRC may make an initial award of a tax credit or cashback, but if it later discovers that this claim is not compliant, it may result in a clawback.
A trading company that carries out any form of unique innovation may qualify for a year-on-year cashback from HMRC under this very generous scheme. A first time claimant company can claim back two accounting periods. Many first time claimant companies I work with receive a six-figure cashback for those two years, money they didn’t know was there for them. A business does not have to be profitable to get this cashback, in fact a loss-making company can obtain an enhanced cashback, up to 33% of qualifying costs can be rebated. Qualifying costs consist mainly of staff costs and/or costs incurred by 3rd party contractors for any innovation work, as well as certain material costs and utility costs. Some businesses have claimed and received small amounts, much less than they were entitled to. What catches many businesses out is that they believe this claim opportunity is an accountancy work-stream, whereas it is really about technology and they may not have identified all of the qualifying activities that could be part of a compliant claim. In this case a specialist IT analyst was assigned to assess and compile the claim to identify all of the qualifying activities permitted within the scheme rules. If trading has been affected adversely during the Covid-19 restrictions, this can be a great way to generate cash from the prior two years trading.”
Business Cash Enabler provides a free service to businesses to check eligibility for innovation tax incentives.
For more information visit: www.businesscashenabler.co.uk
or call Rob Sowden on 07732 627085
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