Managing and running a Research and development for a startup may seem tough. You have to think about a lot of things when you are trying to get your passion off the ground. Therefore, it is understandable if you are not thinking about tax credits for your company right away. You have to realize the scope of money you are missing out on. This can also take little to no time to access them.
Research and development tax credits are a valuable cash source, especially for startup companies. You must know all the ins and outs of research and development tax relief. R&D is basically financial support from the government for companies working on innovative projects.
You need to know why most startup companies miss out on research and development tax credits. This will help you to navigate your way around the various reasons you should avail of it.
Reasons Why Startups don't think about R&D Tax Credit
There are various reasons and misconceptions due to which several companies do not avail of this opportunity. Some of the common misconceptions and reasons are as follows-
1. Some companies are unaware of them
To put it simply, many start-ups are unaware of the benefits of R&D tax relief and credits. There might be other reasons as well for which they do not think about R&D tax relief. One of the reasons could be that they don’t have the time or the budget to seek advice on these tax matters.
If you are starting up a company, by thinking, and investing both money and time into this credit, you can save a lot. Take a look into SME research and development relief as it is ideal for startup companies looking for progress.
2. It sounds too good to be true
Many people have the mentality “if it looks too good to be true, it probably is true”. On the contrary, it is not in this case. The ultimate aim of these tax credits is to enhance innovations, to keep the country in the foreground.
Once you put in your time in researching these credits, you can learn about the various achievable goals it has. Hence, it just doesn’t sound too good to be true; rather, it is true.
3. Understanding the Eligibility
You may be wondering if you are eligible to claim these tax benefits. You are not alone; multiple people think that they might not be eligible. However, you will indeed need to fulfill a lot of criteria to be eligible for the credit. You will have to show that your company is either working or planning to work on a R&D project.
You might require proving how your project seeks to advance in science and technology. This will require you to have the proper paperwork for the products you manufacture. Once you get clearance for the credits, you can explore your opportunities and grow your company.
Developing a new kind of drug can be a very good example. Another example could be if your company does software development to introduce new functionality of existing programs. These can be a few examples of the type of companies that can be eligible.
4. Poor advice from accountants
You have to invest in good accountants if you are unsure of what and how to approach the situation. A good accountant can help you navigate the waters of legal issues and give you the best advice. You should hire an accountant that has the knowledge and experience for this work as they may lack the expertise and fail to identify the type of available R&D projects.
5. Too busy to think about it
You need to realize and consider putting in a claim for this tax credit. Work out your expenditure and the eligibility of your company for this claim. It is important to think about this stuff as it can save you a lot of money to invest in your company.
However, if you require assistance, you can look for some help online. There are some great research and development tools online that you can make use of to understand the factors. The advancement of technology has given you the option to submit a claim almost instantly. Therefore, it is always best to combine human consultancy and technology to get the best results.
If your company is further into its development phase, it makes sense to contact a professional R&D specialist consultancy. This helps you to take the hassle off your mind as the specialists handle the process from the very beginning.
These are the various factors that make companies make afraid to put their time and investment into R&D tax relief. Keeping these in mind and acting accordingly will only add up to the benefits.
