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Can claiming R&D tax credits help turnaround my failing company?

By Linda Eziquiel

The turnaround and financial recovery of a poorly performing company is a complex undertaking, requiring accurate problem identification and development of a realistic improvement plan.

Lack of cash is usually one of the biggest issues. An R&D tax credit/relief claim can help with this if the company qualifies and has not yet made a claim, as it can provide a significant cash boost within 4 to 6 weeks of the scope to qualify being identified.

The company will need to have undertaken qualifying development activities within its past two accounting years. These include improvements to or development of new products, processes or services, that involved some level of innovation. Keep an open mind on what constitutes innovation as the definition is quite expansive. No industry is automatically excluded, but R&D is more commonly found in manufacturing, engineering, fabrication and technology software and hardware industries.

The SME scheme pays out between 18% and 33% of qualifying R&D expenditure. The main expenditure categories are 100% of staff salaries in respect of time spent on qualifying activities; 65% of subcontractor costs for contractors hired to undertake R&D; 100% of materials and energy consumed on the R&D projects.

Note that UK R&D tax credit/relief is only available to UK registered limited companies that are a ‘going concern’ – in other words, the company plans to stay in operation and there is no particular risk of it going into liquidation in the short or medium term.

Seeking external expert advice is usually the first step for a failing company to achieve a successful turnaround.

UK Business Advisors can provide both turnaround and R&D tax credit/relief specialists.

Author: Linda Eziquiel | UK Business Advisors (ukba.co.uk)

(R&D tax credit specialist)

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