Starting up? Three things you need to know about R&D tax credits

Thursday, 20th July 2017


When is a company more innovative than when it’s starting up? The first year of almost any business is centered on new ideas, new processes and new products, as the business finds its niche and develops its USPs.

Yet it’s not just the first twelve months that’s filled with innovation; the formative years of a business can be rife with research and development that’s often overlooked, as products and services are reviewed and refined, and the systems that support the firm are adapted to cope with new demands.

We take a look at three key things start-ups need to know about R&D tax credits, to help fledgling businesses get the most from that valuable early-years research and development.

#1 You only have 2 years to back-date your claim.

For a lot of start-ups, those early years can pass by in a blur, as the entrepreneur and their (often small) team respond to constant challenges. As such, it’s easy for R&D tax credits claims to be delayed until a later date, especially as the process can – without expert advice – be time consuming for senior staff.

Yet putting it off for too long could be costly. Business have just two years to backdate R&D tax credits claims: delaying a claim any time after this could result in potentially lucrative research and development expenditure from the first year being lost.

#2 Claiming R&D at the start will help you innovate in the future

One of the key features of a ‘scale up’ business (the next stage from start-up) is agility. Successful businesses tend to be successful because they are able to respond flexibly to new challenges and opportunities. Without the ability to change and adapt, even the most unique and innovative start-up will struggle to grow, or even survive.

Making R&D claims a key part of the accounting process from the start can help you to fund innovation well into the future, allowing you to respond with agility to each new challenge you encounter.

#3 R&D tax credits aren’t just for successful projects

Not every bright idea makes it through the development process. Sometimes an innovative idea – whether it’s a new product or a change to an existing process – can fail to come to fruition.

Thanks to R&D tax credits that ‘lost’ expenditure can be recouped, allowing you to continue innovating and potentially overcome technical obstacles. HMRC are aware that some research projects can continue for years. Rather than waiting until you find the solution to claim the relief, make sure you submit for the R&D you have carried out over the two year period to avoid missing out.

We know that R&D tax credit claims can be daunting – especially for start-up businesses already juggling a multitude of challenges. However, submitting a claim doesn’t have to be complicated: an R&D tax credit expert can take you through the process with little impact on you and your team, and with MCS there’s no up-front fees to pay. To find out more, including whether your R&D activity could be eligible, call us on 01926 512 475.


Corinne Kutz