The Surprising Truth About How R&D Tax Relief Can Boost Cashflow

30 July 2019

Have you ever thought about how Research and Development Tax Relief can improve business cashflow?

If there is one thing that a lot of businesses struggle with today, it is cashflow. This is especially the case for small businesses and start-ups. All it takes is one client to pay you late to cause stress and worry. However, aside from sending out regular invoice reminders and chasing clients for payments, there are other ways that you can benefit from a cash injection to boost your cashflow. This includes claiming for Research and Development Tax Relief. In this guide, we will reveal more about HMRC R&D Tax relief and how you can use this to enhance your company’s cashflow. Plus, we will also provide you with information on how you can find out how much Research and Development Tax Relief your business may be entitled to.

The Truth About Cashflow Issues

The statistics regarding cash flow problems do not make great reading. In fact, cash flow is responsible for as much as 90 per cent of company failures, according to the Office of National Statistics. Not only this but BACS have revealed that roughly half of all small-to-medium businesses in the UK are being paid late. The average payment debts are estimated to be just over £32,000. When you take these statistics into account, it is not hard to see why all businesses need to make sure that they are actively looking for ways to boost their company’s cash flow.

There are a number of different ways that you can enhance your company’s cashflow. Of course, we are going to take a look at the Research and Development Tax Relief in further depth. However, the following can also help you to improve cashflow at your business…

  • Consider leasing instead of buying
  • Look for different ways to cut your costs
  • Send out your invoices as soon as a service has been provided
  • Send out regular payment reminders
  • Make sure your payment terms are clear and that all clients are made aware of them
  • Conduct customer credit checks
  • Consider increasing your prices
  • Improve your company’s inventory

These are some examples of the different ways that you can improve cashflow at your company. But what about Research and Development Tax Relief?

Cash Flow Vector Illustration Concept Showing cash coin flowing from a water tap

Tax Relief for SME’s to enhance your cashflow

When it comes to looking for different ways to enhance our cashflow, we often tend to focus on our invoice policies and sending out payment reminders. There is no denying that this is important. However, it is important to also recognise that there are other ways you can benefit from an injection of cash. One of the ways to do this is by finding out whether you are eligible for any government benefits. One of the most underused government benefits is the Research and Development Tax Relief.

HMRC Research and Development tax credits are going to add value to your company. The initial cash is one of the huge benefits associated with this. This injection of cash can help to reduce the pressure of working capital needs. There are two ways that R&D tax relief work. These are as follows…

  • SMEs that are making a loss can surrender all or part of their loss for a 14.5 per cent repayable tax credit from HMRC.
  • SMEs that are in profit can receive a Research and Development tax relief in the form of a higher deduction from your profits that are taxable, and this will be at a rate of 130 per cent of the quality Research and Development expenditure.

To determine whether or not your projects are eligible for Research and Development Tax Relief, there are a number of key questions you should ask yourself. This includes the following:

  • Is the business developing any bespoke internal processes or systems?
  • Have you undertaken any projects whereby it was not possible to resolve uncertainties or difficulties from arising?
  • Do you undertake any bespoke services of projects for customers whereby considerable changes are needed to existing processes or products, which will involve uncertainty when it comes to making these changes?
  • Is your business undertaking projects whereby it is unclear regarding how to get from the starting point to the end goal
  • Does your business undertake projects whereby there is technological or scientific uncertainty?
    Could this uncertainty be resolved by a professional who is competent and works in the field?

This should help you to get a better understanding as to whether or not you are going to be entitled to Research and Development Tax Relief. However, this list is not exhaustive and every business is different. This is why the best thing to do is get in touch with an expert and they will be able to analyse your activities to provide you with a truthful assessment.

As you can see, there are a number of benefits that are associated with claiming Research and Development Tax Relief. After all, who would not want to get a cash injection from the UK government to support their research and development efforts? A lot of people do not realise that they are able to do this or that they are eligible for Research and Development Tax Relief. However, it is certainly worth exploring further, as an R&D Tax Relief will help you to benefit from improved cashflow.

A businessman putting two puzzle pieces together with the words Tax and Relief

How Much Money Could You Get From HMRC?

Of course, from someone who has never claimed Research and Development Tax Relief before, you may be feeling at a bit of a loss regarding where to start. There is no need to worry though, as Maple Accountancy can provide help and support in claiming R&D Tax relief from HMRC. By using experts like Maple, you will make sure to claim every penny back and not leave money on the table for HMRC. You can request a FREE R&D tax relief analysis to see if you have any projects eligible for the tax relief scheme.

Maple Accountancy is a firm of expert Business Advisors offering accountancy services, tax and business advice to owner-managed and family-owned businesses.

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