How Your Manufacturing Company Could Claim Back Tax
Dozens of manufacturing firms have been claiming back tens of thousands in tax relief thanks to new R&D tax credits. By choosing to claim R&D expenditure credit, you can benefit from Corporation tax relief on your company’s future research and development costs. Read further to learn how these tax credits could help the future of your business.
What is Research and Development Tax?
Research and Development expenditure credit is otherwise known as RDEC. R&D expenditure credit replaced the large company scheme and changed the rules and applications.
This credit relief is designed to support companies working on innovative projects in technology and science in general. Any innovation can be boiled down to a simple process of resolving uncertainty. Every new creation had to address something in the world that was not quite right and fix it, and this is what reliefs like RDEC want to support.
This can be companies developing new business components, products, software and inventions. The desired result is an increase in new or improved performance, functionality and quality in general.
The research and development expenditure credit was initially 11% of your qualifying R&D spending. It was increased in January 2018 to 12%, then finally 13% in April 2020
As of writing this article, the credit is calculated as 13% out of your qualifying R&D expenditure. Additionally, these expenditures must be incurred after 1/04/2020. This resulting figure is taxable, and depending on your companies status, the credit could be used against the liability or result in a cash payment.
Research and Development Criteria
The RDEC can be claimed by a range of companies working in science, manufacturing and technology. If your company has plans to research, develop, and advance in your field, you may qualify for R&D criteria. As bespoke spring manufacturers, we have a lot of experience with the R&D process required to fulfil our client’s orders.
R&D work must be part of a planned project related to the companies trade to qualify for R&D relief. It can be associated with a current or future trade, but it must be practical; economics, pure maths and other theoretical fields are ineligible.
When determining if your project is worthy of R&D relief, there are several requirements to consider. First, you should ask yourself, did your project:
- Overcome uncertainty? Succeed or fail was there uncertainty to its success?
- Prove challenging to accomplish for a professional in the field?
- Look for a way to improve the field with science and technology?
Which Businesses Can Claim?
Almost any business can apply for these tax reliefs – software engineering groups, spring manufacturers, even construction companies. The focus is on what your R&D project plans to innovate in your field.
There are many different types of R&D relief, such as RDEC. And the size of your company will dictate which is appropriate for you.
SME R&D Relief
If you’re a small and medium-sized enterprise (or SME), you may claim this credit relief, but only if you have a turnover of under 100 million euros or a balance sheet total under 86 million euros. Additionally, you must also have less than 500 staff under your employment.
If your company is loss-making, then the SME R&D relief lets you claim a tax credit of up to £14.5% of the surrenderable loss. Also, you may deduct 130% of your qualifying costs from your yearly profit. This 130% is in addition to the usual 100% deduction to bring you to a total of 230% deduction.
Remember to consider any linked companies/partnerships when investigating these requirements.
You may also claim this credit under certain conditions as a small-medium enterprise. You are eligible to apply for the research and development expenditure credit If you have been subcontracted to complete any R&D work for a larger company. Also, you are eligible to apply if you have received a subsidy or grant for your R&D project.
How Can I Claim?
To claim your RDEC relief, you will need to enter your expenditure into the Full company tax return form (CT600). This form will only apply to the current tax year it’s filled in, so be aware that you will need to submit a separate claim if your project takes longer.
To apply for your claim, you will need to have a GOV.UK gateway user ID and password and all the information on your R&D project, and you must prove it meets the R&D requirements mentioned above.
When applying for your RDEC credit, the main goal is to allow you to offset the tax you owe to HMRC and before and R&D tax relief is paid. This way, Loss-making and profit-making companies are treated the same when claiming.
At Europen springs and pressings, we believe in innovation and growth in the industry. The only way to succeed is to keep pushing those limits to achieve outstanding quality and efficiency. Our many years working to develop new techniques, products and our work with apprenticeships has shown us that only through improvement can anyone succeed in business.
With the broadest range of compressions springs, tensions springs and torsion springs in the UK in our catalogue, we are confident that we can fulfil any of your needs. Please contact us online today or call us on 0208 663 1800 to discuss how we can help your company.