Cash for innovators
We're here to help innovators get back government money for the amazing work they do. Our aim is to help small businesses become great big ones.
R&D tax relief is a big deal for small businesses (and bigger ones too through the RDEC Scheme). In fact, they're undoubtedly the single biggest funding mechanism for those investing in innovative projects. Unfortunately “R&D tax credits” or "R&D tax relief" are not only uninspiring names, they're also a really poor description of the scheme. This means thousands of small companies are missing out even though the government wants to give this cash away. So we like to describe it more simply as cash for innovators. Have a look at our infographic which shows the latest R&D tax relief statistics.
To see if you're eligible for R&D tax relief, take the Babbage Test now. It takes less than a minute and if you pass, give us a ring and we’ll explain what to do next. We’re friendly and we won’t stalk you ever after with sales calls or spammy emails.
If you decide to go ahead you’ll have to provide some financial information and we also need to talk to someone involved in your innovation project. Other than that we pretty much do all the work for you. Once our report has been submitted to HMRC and meets all the criteria, you should receive the cash in 4 to 12 weeks.
If you prefer your accountant to have a bash or want to do it yourself, download our "Definitive Guide to R&D Tax Credits" here. It explains in detail how the scheme works and what you need to do to claim this money for your company.
How it works
Get the ball rolling
First, we’ll speak with you to check you're eligible for the scheme, work out your tax position and check any other details that may affect your claim. This normally takes around 10 to 15 minutes and gives us all the information we need to decide whether or not you have a claim. If you’re not eligible we'll tell you straight away – we don't want to waste your time or ours.
Get the techy stuff right
We’ll then make an appointment for an in-depth phone call or preferably one of our consultants, familiar with your sector, will pay you a visit. Our area of expertise is not the collecting of financial evidence for the claim (although we’re good at that bit naturally), because let’s face it your accountant can do that.
It’s just that we’re complete wizards when it comes to understanding the technical aspects of your development – it could be algorithmic currency trading, nano technology, traditional manufacturing, stem cell research or software development. Our consultants have done them all. So we'll talk to your technical people and write a report for HMRC that describes exactly what your innovation involves and why it’s so important to your business and the sector. That’s our skill and that’s what takes the time and, ultimately, that's what gets you the money.
Make sure the numbers add up
Once we understand the technical aspects and agree it qualifies for the R&D tax credit scheme, we go about collating the costs you have committed to the project. Typically we need information on:
1. The salaries of the PAYE employees involved and a percentage of the time they spent on development work, but don't worry you don’t need timesheets or anything like that.
2. Subcontractor costs
3. The costs of materials used for prototyping or testing
4. Your utility costs (heat, light and power)
Put the full technical report together
The success of your application revolves around the full technical report we write. We will take time to get this right. This basically explains what you do and how it meets the relevant legislation in every way. We explain how your work is new and different, what problems you had to solve, what technical uncertainties you faced and who worked on the project.
Alongside the report, we'll send over a calculation of the costs involved, giving a financial valuation of the total project. We call this the "total R&D qualifying expenditure".
Submit the full report
When it's complete, we'll send your accountant or financial team the technical report and valuation to check and approve. They then submit this to HMRC along with a corporation tax return. If they need help, we're here but, to be honest, accountants and finance people can submit tax returns in their sleep - so once they have all the information it'll get whizzed to the tax office.
Wait for the verdict
Once they've got your claim, HMRC will review it and check the technical report to make sure it conforms to the current legislation. They then look through the valuation figures and check the calculations. If everything's in order, you'll receive the cash between 4 and 12 weeks. Our team know the HMRC R&D tax inspectors quite well, so if they have a query about your claim or need more information we'll deal with it for you.
Sort out the fees
We like to be up front and honest about our fees from the start. We charge you a percentage of the valuation of your innovation costs (we call this qualifying expenditure). We'll never ask you to pay anything up front and our fee is only due when HMRC have agreed that you are indeed eligible for the cash payment or the tax benefit going forward.
On occasions (although it doesn’t happen very often) a client might decide not to take the cash but use the tax benefit in a future year instead. That's their decision, but in these situations although we'd love to work for free, but we're sorry our fee still needs to be paid.
Note that our fee is usually only due when you have received the cash payment or opted to take the tax benefit in a future year. So you really have nothing to lose.
Do I qualify?
You don’t want to be like Charles Babbage, the “father of the computer”. He did all that amazing development work on the first ever computer, only to run out of money in the final straight and see his innovation gather dust in the back room. Perhaps even worse than that, you could see your innovation go to market without the right budget to really make a splash. It doesn't have to be like this. 16,160 companies got an average £49,505 in R&D tax cash through the SME Scheme for their innovation work last year. Why weren't you one of them?Do I qualify?
A bit more detail
The tax credit scheme rewards companies doing self-funded R&D work and it doesn’t matter whether you're in profit or in loss - it almost always ends up as a nice cash payment.
There are a few criteria you need to check. Your innovative project needs to be “an advance in overall knowledge or capability”. Something that your competitors would like to get their hands on. Something that solves a problem in your industry.
You need to have found a “resolution of a scientific or technological uncertainty”. In other words, you might have known that you could solve this particular problem at some point, but not how. If it failed along the way and you had to try different ways to overcome teething problems or design glitches, that’s classed as technological uncertainty.
But you need to make sure your developments are scientific and technical, not aesthetic. We often use a car analogy to explain what we mean; you need to be designing something new or different to go underneath the bonnet, rather than simply making the headlights look funkier. In software terms, you need to be focusing on the back end not the front end.
You also need to have incurred costs directly related to the innovation project. In general we can claim around 25% of these back (the range for the SME Scheme is 13% to 33%, but most of our clients get back 25%). Usually these are salary payments to staff, or to subcontractors and companies you have paid to work on the project. Costs to buy materials for prototypes can be counted too. Try our cashback calculator to get a feel for what you might be able to claim. Just note that if a company has commissioned you to do the innovation project you probably can’t claim under this scheme, but contact us to check, as there are other ways we may be able to help you.
We’re so used to the taxman taking money that it’s hard to imagine there are pots of it waiting for companies to claim. But the truth of it is, there are. The government wants to boost the technology sector and the economy in general. This is one initiative to do just that, and there are very similar schemes all over Europe and in other countries such as Australia and Canada. If it all sounds too good to be true, have a look at the full details of the R&D tax relief scheme for SMEs by downloading our "Definitive Guide to R&D Tax Credits" here. You can also go to the R&D tax credit .gov website here. If you employ more than 500 people then check out the RDEC Scheme.