R&D Tax Loans

What is R&D Tax Relief?

The government Research and Development tax relief incentive allows companies to claim tax savings for the costs they incur from research and bringing innovative products to the market. This was established to encourage innovation in the UK; however, many companies are still not claiming it, and many are not even aware that they may be eligible.

HMRC created this legislation as an incentive to encourage Ltd companies that are developing new products and processes or even improving existing products, processes, systems and materials.

It allows companies to deduct an additional 30% of their qualifying R&D costs from their yearly profits.

Eligibility for this tax relief is through qualifying activities rather than a specific industry or sector. A wide range of industry sectors have successfully made claims.

We have partnered with a Tax advisory service that will assess your eligibility at no cost meaning there is nothing to lose in making an initial enquiry.

R&D Tax Credit Loan

An R&D tax credit loan is a relatively unknown type of finance that allows you to use your future R&D tax credit payment as collateral in order to raise finance now.

Subject to a successful R&D tax credit claim, one of the major issues is that it can be very slow to receive the payment that is due.

With an R&D tax credit loan a business can have access to the funds during the year in which the R&D spending occurs. This type of loans works in a similar vein to invoice finance. The difference being that the business is simply factoring an expected invoice from the government, HMRC.

Why take an R&D Loan?

An R&D tax credit loan can be good source of raising working capital for SME businesses without the need to take on traditional debt finance via bank loans. It is a great source of revenue for businesses that are at the stage of pre-revenue or between funding rounds.

For businesses in the start up or early stages of trading obtaining crucial capital can be difficult from a traditional lender, leaving selling equity as one of the only viable funding options. R&D Tax finance is a great alternative that effectively uses future assets to fund your current capital requirement without the need to give away equity.

Its also much cheaper than giving away equity in the business, you know from the start exactly what you will be paying back.

How it works

Before a business can apply to take an R&D loan, they of course first need to have a valid and approved claim which can be done by speaking with a qualified R&D tax advisor.

To be eligible to claim a company must:

• Spend money on R&D in the current financial year
• Wait until the company’s financial year end comes around
• Prepare the accounts
• File the R&D tax credit claim as part of the CT600 form

Upon a successful claim a loan can then be obtained against the value subject to due diligence of the lender who will look at a number of factors including both the companies history with R&D tax credits (if they have one) along with a few key company documents which would usually include the latest company financial accounts along with a cashflow forecast.

The average time scales are usually around 2-4 weeks from initial conversations but subject to approval loan documents would then be issued as with a traditional business loan.