In such a competitive market it is sometimes difficult to find the resources necessary to invest in R&D. Fred Tongue caught up with one of Leyton’s R&D consultants to discuss how R&D tax credits can help to increase your R&D budget year on year.
The world of R&D tax credits can be a confusing one, with uncertainty on how to apply for tax relief and credits, where to begin the process, and what qualifies for the scheme.
It isn’t always brand new technologies or innovations that qualify, a Leyton spokesperson explained.
“Sometimes clients think it has to be something totally new, but a lot of our clients are continually looking to improve and build upon their existing technology. For some reason they don’t believe that improving processes or improving existing products, fits in with R&D,” they elaborated.
There are a lot of misconceptions about what qualifies and about the scheme in general. When it comes to misconceptions, manufacturers are often guilty of thinking “just doing my job” means they aren’t doing anything innovative.
Leyton’s R&D consultants often find that clients are doing far more than they think, “When you dissect what clients are doing, they’re doing a lot of technical problem solving on an almost daily basis.
“It takes quite a lot of effort and clients apply a lot of engineering tools and what they’ve learned over the years to solve these problems,” they added.
A lot more than just new products qualify for government relief. Manufacturing cars is a good example.
The car manufacturer may be eligible for R&D tax credits because the car has a new feature, but for that feature to function properly, a Tier one supplier may have had to create a product for the new car, and a Tier two may have to produce something new for the Tier one supplier and so on.
This trickle down R&D is all entitled to government relief; it’s not just for the final product.
These kinds of improvements are not easy to maintain but R&D tax credits make it easy to continuously and incrementally increase your R&D budget year on year, if done correctly.
“It’s great to see clients with one eye on the R&D claim for next year because they know they will get some reward for it from the Government and so it’s encouraging them to constantly innovate.
“Then the next year they will have grown again, almost as a direct result of doing some innovation and getting rewarded through this scheme. If you get that money back then your budget increases by an extra 30%, then you can invest that increase, and the next time you claim it back it’ll be greater,” the Leyton representative concluded.
By knowing what qualifies for R&D tax credits and how to claim, it makes it much easier to factor them into an ongoing R&D budget.
The entitlement to tax credits allows firms to recruit new staff, purchase new machinery and ultimately, continue to grow.
To find out more about how you can capitalise on R&D tax credits visit: www.leyton.com/uk
