R & D taxes explained for anyone

Posted by Cynthia Madison on February 9th, 2018

Worry not – this article is going to explain to you, in a very clear and simple manner, what a very popular concept means and how you can use it for your own good. This concept is called R & D taxes and it is translated into research and development taxes that the government gives to companies that are evolving in the direction of innovation. The companies that can opt for R and D tax credits are usually spending money for developing different kinds of products or services that are not yet available on the market.

Some companies can get research and development tax credits even if they are upgrading an existent product or service to the extent it becomes much useful than before. If you qualify for any of the situations listed above, then you might be interested in the next steps to obtain a research and development tax credit. Here are some pieces of information you will find useful:

Decide if you are eligible for the credit

Besides the aforementioned conditions, you have to respect some other ones in order to qualify for an R & D tax credit. Your company needs to be able to explain how the product or service that you are investing in will innovate the existent science and technology field. If the product or service it’s somehow overcoming uncertainty or at least tries to but fails – you will still be eligible for an R & D tax credit. Some requirements might depend on the country’s legislation and guidance, so make sure you do your homework before opting for such credit. You also have to pay lots of attention to previous attempts in innovation. If professionals previously tried to do what you are doing at the moment, you might not be eligible for a research and development tax relief.

Be aware of the costs you can claim

The costs you claim directly depend on your company’s size and domain. These tax credits are dedicated to SMEs in all working sectors. You have to calculate your company’s capital expenditure. Now, pay attention to the costs you can claim for your R & D tax credit. Start with the staff costs where you should include all of your employee’s salaries, the bonuses you are offering them yearly, the pension contributions etc. and continue with the consumable material costs.

Since it is about research and development, you need to specify the exact materials you had to invest into in order to create your product prototype, if that’s the case. On the other hand, if there is no physical product implied, you can ask for software costs reliefs. Most specialist software that allows companies to create certain products or services are entirely based on licensed, special software programs that cost money. Include them in your claim too. Utility costs can be included in this category as well. Take your time calculating all of the spendings and you’ll get a considerable R & D tax credit for your SME.