The R&D Tax Relief scheme has been providing financial assistance to innovative businesses throughout the UK since 2000. Both the SME scheme and RDEC (the replacement for the large company scheme) has helped hundreds of thousands of businesses in the UK and has disbursed an estimated £16.5bn in tax relief.
The schemes have played a large role in the success of tech businesses, both large and small. This is largely due to the scheme being available to companies that show large levels of innovation within their field.
So, you’re the head of a tech business
If you are a founder or senior leader in a tech company, you really should be making sure that your money is working as hard as it possibly can, and the business is maximising its cash flow. R&D Tax Relief works on two fronts by reducing an accounting loss – meaning less profit is needed in the future before you can pay dividends– and more importantly generating a repayable tax credit. Tax credits are accrued during those lean years where development is the focus ahead of sales, meaning cash ow can be improved by up to 33.35% of the R&D spend.
Burn rates in tech companies can be significant and regular claims for R&D Tax Relief as the development progresses might just help to keep the tech business funded and prevent it from running out of cash. If you are also looking for investment, a history of R&D Tax Relief claims shows that not only are you capable of building a successful product, you are also a business savvy leader and may set you apart from the competition.
Saving businesses money
Cooden Tax Consulting has helped businesses make huge savings on their R&D projects through the R&D Tax Relief scheme.
When it comes to research and development tax relief, there are a number of items that tech businesses can claim for. In brief, these can be shortlisted down to: developing new software or apps, overcoming a barrier to development within the industry, and making significant improvements to existing systems.
The following case study provides a quick look at how much R&D tax relief can benefit a start-up and scaling-up tech business.
This particular fintech company were one of Cooden’s first clients, and Cooden had seen their innovative customer loyalty business through to their third pivot. The firm’s most recent claim for R&D Tax Credits is for a rather complex project, an extensive and expensive collaboration with Visa and Mastercard to connect their data feed to business loyalty schemes. Their software enabled consumers to build up loyalty points without needing to remember a loyalty card or keyring.
They have secured over £50,000 of cash from HMRC so far, despite never having made a profit nor paid a penny in tax, and there are still more claims to come. Whilst only a relatively small claim, this cash has been hugely beneficial to the company.
Not a tech business? You could still be eligible for R&D Tax Relief
R&D Tax Relief doesn’t just apply to projects undertaken by so ware and app developers or those in the more research-intensive industries such as pharmaceuticals and biotechnology, “the men in white coats” image of R&D, it also applies to those within the telecommunications industry, manufacturing and engineering industry and even the food & drink industry. Think that your business, or a business that you invest in, could be eligible for a claim? Contact Cooden to find out more.