Research and Development: it is more common than you might think in UK business. Many companies struggle to define what they do as research and development activity, even when it would almost certainly qualify under the HMRC guidelines.

The good news is that this R&D is rewarded through the tax system with tax credits, because the government wants to make the UK the best place in the world to run an innovative business or service.

R&D is certainly not confined to the laboratory or the engineering works as many people can assume. For instance chefs, mobile app developers, packaging designers, SEO companies  and digital agencies have all successfully claimed these tax credits. You can watch some case studies here.

If your accounting period ends on 31 March read on to find out if you too could receive a surprising windfall from the taxman.

Because in fact any business that innovates, improves or develops a process, product or service and assumes some risk in the outcome may well be carrying out qualifying Research and Development.

Why is 31 March important?

You can actually go back to the previous accounting period and retrospectively claim for that your past two years worth of R&D expenditure.

So for companies who’s accounting period ends on 31 March, now represents the final opportunity to gain R&D tax credits for the their year ended 31st March 2012.

How much could I gain?

For SMEs, R&D tax credits are really generous. For every £50,000 spent on research and development up to £112,500 could be deducted when calculating taxable profits (or relievable losses). So in cash terms the benefit could easily run into tens of thousands of pounds, and in many cases much more. The possibilities are too good not to be explored.

How do I claim R&D tax credits?

The most effective way is to use a specialist. To the trained eye R&D activity is quite apparent, but it can be difficult for the untrained eye to see the true potential of these claims. After years of experience of experience, a specialist tax consultant will be able to identify relevant expenditure with ease and manage the claim  process through to completion.

And this is why it is so useful to be able to go back to the previous accounting period with these claims – and why 31 March deadline is potentially so important. Because unfortunately, it is not uncommon for a reputable advisor to simply not recognise the innovation. But companies have a second chance to sweep up claims that were previously missed.

A good time to spring clean your tax affairs

Company Directors often turn their attention to their tax affairs at this time of year anyway. With the 5th April deadline for dividend payments, and deciding on pension and ISA contributions it is a good time to focus on corporate tax planning.

If there is a chance that your company is eligible for R&D tax credits too, you could make it a clean sweep for tax breaks this year. But act as soon as possible because it will take some time to prepare the claim in time for 31 March deadline. The claims process typically can take up to Four weeks to compile the documentation for the R&D Report

For more information and an idea of whether you could be in for a tax windfall, feel free to get in touch.