I’ve just been talking with the FD of a company that is (in my opinion) almost certainly incurring significant amounts of expenditure on qualifying R&D. What’s more, it’s pretty clear that they’ve been doing so for several years. The directors of the company are working hard to grow it in a competitive market. Which begs the question, why are they paying more tax than they should? Wouldn’t it be better if they claimed the R&D relief, paid the right amount of tax and invested the amounts currently being overpaid back into the business?
Of course it would!
So why do so many businesses fail to claim the R&D tax relief to which they are entitled? There are many reasons for this but the one I see most often is that, like the company I’ve just been talking with, they simply do not realise that this relief is available. Or maybe they have heard of the relief but they don’t realise that they are actually performing qualifying R&D. How often have I heard “we don’t do R&D, we just develop new products”!
To be fair, unless they have a strong in-house tax team, it is unlikely that the company is going to be aware of all of the tax reliefs available to it unless someone tells them. So why are so many advisers not telling their clients about R&D tax relief? Unfortunately, I believe that this is because many of them really do not properly understand it themselves. Which, to be fair, is not entirely unreasonable as this is a very specialised are of corporate tax.
At least the company I have just been speaking with is now aware of the reliefs available to it and they are now in a position to start claiming.
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