The R&D tax credit scheme encourages innovation, by providing a safety net to allow companies to do some risk-taking.
by Charlie Burgess, Technical Analyst
You wouldn’t step out onto a tightrope without a safety net, or jump out of an aeroplane without a parachute – well, maybe the odd adrenaline junkie would – but most people prefer an element of safety even when taking part in a risky activity! Whilst unlikely to result in broken bones, taking the step towards innovation can be a risky activity for many small businesses, bringing with it the chance of failure and the resulting loss of much needed money.
If only there was a safety net for such a risky business….oh, wait, there is! R&D tax credits.
The R&D tax credit scheme was introduced in 2000 to encourage innovation, by providing a safety net to allow companies to do some risk-taking. The scheme works by enhancing all money spent on R&D in a financial year by 130% (as of April 2015) for SMEs and 30% for Large Companies. This enhanced expenditure is deducted from taxable profits, leading to an often substantial reduction in corporation tax. Loss-making companies are even eligible for a cash credit.
This means that a huge amount of the risk is taken out of innovation, because even in the event of your project failing, you can recoup some of the costs that went into it. Like a safety net under a tightrope, R&D tax credits are a nice cushion that can encourage small companies to take the first step.
Don’t go it alone, for a free R&D tax credit consultation and analysis of the potential returns you might expect, contact the Jumpstart team: by telephone on 0844 273 7281, send us an email helpinghand@jumpstartuk.co.uk
