Lowtax Network

Back To Top

Can R&D Tax Credits Boost Your Business In 2022?

Chester Avey
09 December, 2021

Businesses can benefit enormously from research and development (R&D) tax credits. This is a UK government initiative that has been setup specifically to encourage and reward innovation in businesses across a wide variety of industries. But, crucially, R&D tax relief can be used to help your business grow.

Here, as companies look ahead to their 2022 strategies to boost both productivity and profitability, we look at the ways tax credits can help.

Focus on innovation

Innovation is undoubtedly an absolutely vital element of business growth for many companies, and it can offer you opportunities to grow in ways that your competitors cannot. So, perhaps the most obvious thing to do with the money from your R&D tax claim is simply to reinvest it into further innovation.

The opportunities that innovation offers can take you into new markets, with different products and services, as well as creating new customers and streams of revenue.

Recruit specialist staff

The money that you receive from your R&D tax claim can be used for any purpose, and so it isn't surprising that many businesses choose to channel it into hiring new members of staff. Many businesses struggle to keep up with the demands of growth, especially with regards to needing new staff.

Adding staff members is vital to growth as you are able to match customer demand and not allow the business to become overwhelmed.

Launch new products

There can sometimes be a fear around new products in the idea that they won't be successful - this can put businesses off making the steps forward they need for long-term success. In this sense, products fail before they have had the chance to fail, because the company never takes a chance on them.

But R&D tax credits can be claimed on projects whether they are a success or a failure. You need to have looked for an innovation to claim R&D tax relief, but you don't need to have been successful.

"In many cases, failure is more common than success when it comes to new product launches," says Simon Bulteel, Director of Cooden Tax Consulting "the good news is those failures are great news for your cash flow; they clearly weren't at the time, but they are now. Normally your failure would go hand in hand with a scientific or technological challenge that you were trying to overcome."

Invest in equipment and software

Just as growing businesses need to have the right team in place to be able to expand effectively - they need to have access to the best software and equipment too. Thankfully software, hardware and other equipment that are used for R&D work fall under expenses that can be claimed against R&D tax relief.

A strong R&D claim can also offer the opportunity to invest in the equipment and software that you need. This can help with overall productivity and efficiency for staff throughout the business.

Reduce your debts

It is a natural part of company growth to accumulate debts. Whether these arise out of bank loads, credit cards or overdrafts, companies often have to take steps to manage their cash flow and ensure there is always money in the business when it is needed.

The money saved via successful R&D tax claims can be used to pay off those accumulated debts, which in turn frees up the business finances even further.

Use your profits however you like

The key thing to note is that money claimed from R&D tax relief can be used for any purpose by the business. Whatever is best for your business at the time to pursue growth and move forward towards the goals of the company, there are no limits once the claim has been made.

This freedom is absolutely essential as a part of growth as it means you are not tied to using the money a specific way. Although the UK Government reported an estimated GBP 85,900 of R&D tax credits were claimed in March 2020 (an increase of 16% from the previous year), many businesses continue to miss out on R&D credits simply because they aren't aware that they can claim them. It is too often assumed that R&D only applies to complex science and pharmaceutical businesses when it actually covers work in a much broader variety of industries.

R&D credits provide a genuine and valuable way of maximising your finances - and if you are eligible for them, your business should undoubtedly claim them. It can make a huge difference to the way that your company operates. In the short-term, it can help your business grow, and this feeds into long-term success.


« Go Back to Articles

Articles Archive

Event Listings

Listings for the leading worldwide conferences and events in accounting, investment, banking and finance, transfer pricing, corporate taxation and more...
See Event Listings »