Debbie Hancock

Debbie Hancock

Owner of Southbourne Accountancy & Business Services

Can businesses making a loss claim R&D?

This is a question that comes up a lot. The quick answer, if a business is making a loss, yes they absolutely can claim R&D tax relief (as long as they’re eligible ). But many businesses aren’t claiming because they don’t realise that even if they’re not turning a profit, they are entitled to R&D tax relief.

The truth is the cashflow benefit is actually greater for loss-making SME’s. Here’s the numbers:

If a company has made a loss then HMRC will make a cash payment to them of up to 33.35p for every £1 spent on R&D activities.

If a company has made a profit then HMRC will make a cash payment to them of up to 24.7p for every £1 spent on R&D activities.

It may be the case that your business was making profits prior to the R&D claim but following the application of the tax relief the business is now making a loss (from a tax perspective). In these circumstances, the amount of R&D benefit they receive will sit somewhere between the ranges set out above depending on their specific circumstances.

Quick recap

R&D tax relief was introduced by the government to support and incentivise innovation amongst small and medium-sized UK businesses. A company can claim cash payments of up to 33% of the costs incurred on activities that are considered eligible and these funds can be used for any purpose including the payment of dividends!

All businesses are potentially eligible to claim the relief, provided funds have been spent on developing new or existing products, processes, and other technologies.

To make a claim, a business must:

Make a considerable improvement to existing technology

This does not always mean it is ground-breaking or innovative work. If a business is working to make its product, services, or processes, faster, less expensive, or better in some way, then this may be eligible for R&D tax relief.

If you would like to understand if you are eligible then why not jump onto a quick 15 minute “rule in, rule out” call with our R&D expert. Click here to book.

2. Download our free guide on “7 mistakes to avoid – to stop your fitness business running out of cash” https://southbourneaccountancy.co.uk/fitness-ebook/ 

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