Middle-market companies have been found to be the least likely to take advantage of R&D tax credit, or research and development tax credit, which is highly under-claimed each year. It is estimated that a large portion of this money is left untouched each year with many companies simply not understanding just how much profit could be kept with the help of this option. There are a number of prevailing misconceptions and downright myths about the R&D tax credit and this is a large part of the reason that so many companies do not take advantage of this exceptionally beneficial option.
Reduced Liability
If you are unsure about whether this could help your company, you can easily look up an R&D tax credit example to truly get an idea how this might for your unique situation. One of the most common reasons to consider this tax credit is that it will reduce your income tax liability, and specific types of research may even enhance certain tax credits. It is a good idea to look into whether your credit would be refundable or carried forward, with each option having its benefits and small differences.
This is a pound-for-pound reduction in regular income tax liability, meaning that it is important that you look for such opportunities across a wide credit plane. Otherwise, there may be money left on the table that you simply do not realise that you could take for your own until it is too late. This is one option that will allow you to make the most of your annual profits while ensuring that you experience fewer frustrations after a hard fiscal year.
Improved Cash Flow
R&D tax credit is a pound-for-pound benefit, meaning that you can save up to 26p for every single pound spent on qualifying R&D expenditure. There is also plenty of the tax credit to go around because fewer than a third of eligible companies recognise that they qualify for this tax credit each year, meaning that much of the cash is available and untouched. There is also the fact that while some companies do understand that they can use this tax credit, they fail to take the entire credit entitled to them, which is commonly due to a lack of understanding of what does and does not qualify as an R&D expenditure.
Easy Identification
There are a large number of missed opportunities for companies filing a claim for this type of tax credit, one of which being unclaimed credits from prior years that would significantly increase the amount of profit kept. With many tax credit claims, you may look back up to two years, which will make filing for this type of tax credit possible even if you miss the prior year or two of opportunities. It is now easier than ever to do this, although it may be in your best interests to contact a professional capable of helping you to discover your many options and to capture every single instance of relevant R&D expenditure that could help you reduce your liability for those years and for the future.