At the time of the latest government report in September 2018 there had been 39,960 research and development (R&D) tax credit claims, with over 85% coming from the SME sector. The number has in fact doubled since 2014, so the word around R&D tax credits is getting out there slowly but surely.
However, for those of you who read my spring statement and autumn budget summaries Philip Hammond confirmed a commitment to crack down on the abuse of R&D tax credits in the SME sector. It looks like a few individuals could ruin this for the rest of us!
HMRC has identified a number of structures being created to improperly claim the credit where there is no legitimate R&D activity. Approximately £300 million of tax fraud has been linked to the relief. As a result of this, from 1 April 2020 it’s proposed that the payable R&D tax credit which a loss making business can receive will be restricted to three times the total PAYE and National Insurance liability for that year.
My advice is that whilst you think you may not qualify let us take a look before the reliefs are tightened up. It’s better to make sure than miss out on something which could boost your business, and don’t forget, the claim can go back 2 years.
I’ve attached a simple flowchart which will give you an idea of whether you might be able to claim or not, but please remember that you don’t need to be in a ‘white lab coat’ to claim R&D tax credits. If you would like to find out more, please do get in touch and we’ll be happy to help.