Also online at: www.dijonline.co.uk 40 THE door industry journal winter 2023 Industry News Could You Be Benefitting from R&D Tax Relief? Ben Brookes, Partner at Wellers, the small business accountants for SMEs, discusses what research & development tax reliefs are and how your business could benefit. In August, HMRC implemented substantial updates to the R&D tax relief procedure to ensure better accountability and greater compliance for these claims. These measures are especially significant considering the intricate and extensive nature of the UK’s tax system. So, why should door manufacturers, in particular, take note of these changes, and how can R&D tax relief enhance their competitiveness and reduce tax liabilities? Understand R&D tax relief R&D tax relief is a government incentive designed to reward UK businesses that invest in innovation. Door manufacturers that are innovating to meet more stringent building regulations and energy targets, including the Future Homes Standard (2025), are well-positioned to leverage these benefits. How R&D tax relief works When a business invests in innovation, such as developing new products or enhancing existing ones, it is potentially eligible to make use of this tax break. This potentially leads to either a cash payment or a reduction in Corporation Tax. Eligible SME businesses can claim an enhanced deduction of up to 86% of their qualifying R&D expenditure. This equates to an additional £86 deduction for every £100 spent on qualifying R&D, significantly reducing the overall Corporation Tax liability. For businesses operating at a loss, R&D tax losses can be surrendered to HMRC for a cash refund, also known as a tax credit. The credit amount varies based on the proportion of qualifying R&D expenditure compared to the total. How to know if you qualify To determine eligibility for R&D tax relief, projects must demonstrate the following: • Innovation or advancement within a specific field • Challenges during the implementation process • Efforts to overcome these challenges • Inability to resolve these issues using industry professionals or existing solutions You can also assess your eligibility by considering these five questions: 1. Have you developed your own software? 2. Have you created internal processes that reduce costs and improve production times? 3. Has your limited company made advancements in science and/or technology? 4. Are you involved in manufacturing goods? 5. Are you using existing technologies uniquely? If you answered ‘yes’ to any of these questions, it’s advisable to consult with a tax advisor about your eligibility for a potential claim. What you could potentially save R&D tax relief offers substantial savings, allowing SME businesses to: • Deduct an additional 86% from their qualifying costs, resulting in a total deduction of 186% when combined with the standard 100% deduction • Claim a payable tax credit, which can be worth up to 10% of the loss for companies that have claimed relief but still incurred a loss In Summary The UK recently ranked fourth in the 2023 Global Innovation Index, reflecting the country’s high level of innovation across all sectors, with significant contributions from the manufacturing and fenestration sectors. However, not all eligible businesses have fully utilised R&D tax relief. Navigating the intricate ever-changing landscape of taxation can be challenging and if the R&D claim isn’t conducted properly can potentially lead to future issues with HMRC. For this reason, you should collaborate with an experienced accountant and tax advisor who can guide you through the process and ensure you comply with all regulations. Find out more about R&D tax credits.
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