If You Think You Understand Agents, Then Read This

April 1, 2019 0 By Maryanne Allen

Why You Need To Figure out Your Research and Development Tax

Every business owner out there is looking for ways they can cut on cost and improve on the returns they are making annually. Taxes imposed on businesses by the law of the land a have to be paid if you want to stay in business. SMEs and mid-sized business in most cases tend to misinterpret and overlook the research and development tax credit which should not be the case.

It’s about time you begin paying more attention to issues like these because you could be missing out on some valuable cash refund that you are entitled to annually. For the longest time I have been a popular belief that research and development tax credit is only available to people that have onsite laboratories.

Business owners need to realize that the research and credit tax credit exists across many industries and is used as a reward to people that are investing in improving their products. However, before you jump in, it’s good for you to understand the code language used and what it means in relation to qualifying activity. When you talk of qualifying activity, it’s research which is being funded by a taxpayer is funding directly or one that is being funded by a third party on behalf of other taxpayers.

For research also to qualify it needs some four distinct elements. One the component is permitted purpose, the activity should creating a new or improve reliability, performance or the functionality of the business component in question. The business component could range from a product, technique, formula and even a software. The business component has to be for sale, lease, licensing or to be used in the business of the taxpayer.

The second element is the elimination of uncertainty that stipulates that the taxpayer needs to come up with information that will erase all uncertainty concerning the business a component being developed or improved. Process of experimentation is another is another element that comes into play with the research activity, the taxpayer needs to have a method through which they evaluate different alternatives to arrive at the desired results.

The last component will be the technological nature of the activity, this will, however, depend on what the business component is, it needs to be either physical, biological, engineering or based on computer science. The taxpayer needs to make use of the existing principles of science to fulfill his requirement. If you are operating on higher scale and performance, qualifying will be a bit easier as you will likely be facing a lot of challenges in the process of developing business component or making an existing one better.

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