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Submitted by: Steve. A Shaw
R&D tax credits stands for Research and Development Relief. It is a corporation tax relief that could reduce the tax bill for your organization or company. However, not all companies or corporations are eligible for this type of tax credit. To determine whether or not you are, you must gain more knowledge of R&D tax credits.
Research and development is important for many companies. This crucial department helps businesses determine what type of products should be introduced, and what products should be discontinued. It also helps them in building new products and expanding their ideas. Without research and development, companies would not be able to expand their horizons. However, this type of work requires a lot of time, effort and especially money. The expenses required for R&D can cause a company to lose a lot of money. This is where the R&D tax credits come in handy.
In order to qualify for the tax credit, the research must fall under a few guidelines. First, it must be of a scientific or technological nature. It must also be beneficial to your company. The research and development must help the company achieve advanced knowledge of the scientific or technological aspect that they are looking into. It must also be related to the companies trade or field of expertise. The activities that are performed must directly contribute to seeking an advance in science or technology. The company must also be liable for corporation tax to qualify for the R&D tax credits.
There are two types of companies that can qualify for the tax credit. The type depends on the size of the company. The first one, Small or Medium-sized Enterprise (SME), will have less than 500 employees. An SME will also either have an annual turnover of under 100 million or a balance sheet of under 86 million. Other companies fall under the Larger Company type. The type of company comes into effect when you have to claim your R&D tax credit. SME companies will claim theirs differently than large companies.
To qualify for the tax credit, the company must spend a minimum of 10,000 a year on qualifying research and development. However, there is no cap on the amount that you can spend. As long as you meet the minimum requirement, as well as all others, you are eligible for the credit. The costs are broken down into a few different categories. Employee costs and staff costs are crucial for R&D. You must pay your employees that are handling the research and you must also take care of costs for staff that are assisting the employees. Materials and software used for the research and development also counts towards qualifying costs. If you have to make payments for any clinical use or any trials that have to be performed the cost would qualify as well. Finally, all utilities that you must pay while performing the R&D qualify towards the credit. This includes gas, water and electricity.
Research and Development tax credits are not for every company. In fact, mostly technology or science related companies qualify for the tax credit. However, it is important to know the qualification guidelines to determine whether or not you can claim the credit. If all the guidelines relate to your company, then you can claim the credit.
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