Being British is hugely in vogue, but are you capitalising on this?
It’s never been more fashionable to be British and I have see a long awaited revival in UK manufacturing, largely as a result of forward thinking entrepreneurs who decided to invest and ‘be British’. But if you’re investing, do you know that you could claim R&D Tax Relief or R&D Tax Credits? There are entrepreneurs who are and they are spearheading the growth in their sectors.
I call this particular breed of entrepreneurs ‘Growth Pioneers’ – those who have specific plans in place to achieve huge growth through entering new markets, investing in staff or diversifying their offering.
These are the entrepreneurs that will grow their businesses because they are flexible and innovative.
And being innovative is where there are some great tax breaks to be had.
You may know that a passion of mine (well, one of them) is motorsport and I had the pleasure of working with Caterham Cars a few years ago (pre Tony Fernadez acquisition) to look at the reach of their brand. Now, the 7 model is hugely expanding to a point where they can’t keep up with demand and are having to throttle production because of supply issues. That in itself is a great opportunity for their supply base to grow, but they haven’t, yet. But why not?
I’d hazard a guess that those business owners don’t have the right information to hand to make decisions and the right finance tools in place to ensure that they have the most opportunities to grow – both at home and overseas. These tools come in simple forms such as debt finance provided by overdrafts, loans, trade and receivables finance but for some, it comes directly from the government in the form of tax breaks, specifically, R&D Tax Relief and R&D Tax Credits.
So ask yourself, do you have access to these tools or know where to get them?
Our customers all have these basic tools to hand.
Let’s start with just one of them…
R&D Tax Relief
How does R&D Relief work I hear you ask…
In a nutshell they are tax incentives to encourage technical firms to invest in developing their own innovative products, and make the UK more competitive on the global scene.
R&D Tax Relief works by reducing your taxable profit (perhaps all the way into a tax loss) and thereby dropping your Corporation Tax.
However, even if you don’t owe any Corporation Tax (or don’t owe much), the scheme can still provide you with cash in exchange for “surrendering” some of the tax loss that has been created. In other words, R&D Tax Credits can help whether you’re profitable or not.
How much can you get?
230% – that’s how much
Yes – 230% of your “qualifying costs” can be recovered. That can make a real difference to cash-strapped startups – and just as much difference to funded startups that are spending a lot of money on developing innovative products.
There is one disadvantage to the shape of the scheme. Because it is a tax break, it is only usable after you have finished at least one accounting year. However, there’s a trick that you can use even there: although you are only allowed to lengthen your accounting year once every five years, you can shorten it as many times as you want. Some of our clients have opted to use this trick to get the tax credits early. If you have 12 months of runway, it makes a lot of sense to shorten your year to 7 or 8 months so that you get a helpful cash injection in the 10th or 11th month, allowing you to extend your runway by a couple of months just as you’re about to run out.
Who can get it?
Anyone!….who pursues investment in R&D that it.
Sticking with the car theme, the defunct British manufacturer TVR will be making a comeback in 2017 and it’s owner Les Edgar is working with Gordon Murray (famous for his work on McLarens 243mph F1 hypercar) to develop a new V8 Cosworths powered car. Ansar Ali of Zenos Cars (http://www.zenoscars.com/) is another Growth Pioneer building another great British sports car..
And if we move to another one of my passions, triathlon, then you can see more Growth Pioneers. Firstly Stuart Abbot of Dassi Bikes (http://dassi.com/) building a great British bike company and Dean Jackson of Huub Design, the best swimming wetsuits in the world (http://huubdesign.com/)
What do all of these successful British brands have in common? Being innovative and using the tax system effectively.
So if you’re innovative, then see if you can qualify for R&D Relief. We have a simple guide available for you. Just call our office on 01483802230 and we’ll mail it out to you.