It’s no secret that the business world is changing. New start-ups are popping up every day, and with them come new opportunities. But it can be hard to keep up with all of the changes. One thing you don’t want to miss out on is claiming R&D Tax Credits for your company.
In this blog, Anne Rose, Head of Tax at Burgis & Bullock, takes you through everything you need to know about how to claim R&D Tax Credits in 2021 as a start-up entrepreneur or business owner.
What is R&D tax relief for start-ups?
R&D tax credits are a way for the Government to reward innovative behaviour and companies that are seeking to develop new products, processes and technologies – or make significant improvements to existing technologies.
They are a means of getting valuable cash back into a start-up business at a stage before they are potentially able to sell anything and are still in the innovation/R&D stages of product development.
How to claim your R&D tax credits
It is important to say that only a company can claim R&D tax credits, not a start-up which is is being run as a sole trader or partnership – if that’s the case, the business won’t be entitled to make the claim.
The primary way you can claim R&D tax credits is by submitting a claim through the HMRC portal.
Certainly, the normal way that you claim is at the point in time when you complete your statutory accounts and submit a corporation tax return.
You claim in respect of any accounting period, whenever you set your year-end to.
When completing your set of accounts, you can complete your tax return and file it with the R&D tax return.
A claim can be made at any time up to two years after the end of an accounting period. For example, December 2019 year-end could still make a claim in 2021 as long as it was filed before the end of this calendar year.
Businesses can employ professional support to do this, such as with our tax team at Burgis & Bullock.
But, for smaller businesses, whose claims may be small enough not to require professional support, a new system has been introduced called Advanced Assurance and allows small companies to complete their own claims.
Advanced Assurance is used in addition to making the formal R&D claim in a tax return and can only be done before a first claim has been made.
The company will be asked to fill out forms describing their work and then HMRC will call the business direct to discuss, before writing to advise whether the business would qualify for R&D tax credits.
HMRC will then not ask queries about the first three years of claims a company makes, as long as the R&D activities remain exactly the same – however, HMRC will call every year to check!
It is often difficult for a start-up to know what they will be doing for the next three years in terms of R&D.
The vast majority of businesses will seek professional help and wait until they have done some qualifying activity and know exactly what they have done in an accounting period.
