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Why don’t start-ups claim R&D tax relief?

Posted on July 7, 2021

R&D Tax Credits should be a go-to for many start-up companies simply because of the amount of innovation these businesses are involved in. These companies tend to always be eligible for a claim and as we know, startups are always after funding. There it makes us wonder why R&D tax relief claims are the lowest amongst these companies.

We noticed there are three main reasons for start-ups not using this helpful scheme. These reasons are: 

They have claimed other grants

Many companies think that you can’t claim R&D Tax Credits if you have recently received grants or other funding. This way of thinking is common with many start-up founders. This is unfortunate, as they are more likely to have received more funding as a result.

Receiving funding doesn’t prevent businesses from claiming R&D but, it may affect the tax benefit that you may receive.

Busy Business

Being busy is a common factor in why a business will hold off of claiming their R&D but, this is especially true for start-ups. Most founders are very busy trying to secure funding, develop their product and sell their product – plus, are doing all of this whilst being unsure if the business will even exist in a few months. For a start-up owner to take the time out of their day to work on an R&D tax claim, they will have to be sure it’s going to yield results.

The costs don’t add up

This may be the main reason for many businesses not claiming R&D tax credits. For many start-ups trying to get their company off the ground, the founder/directors will often go unpaid or are on very low salaries. deficiency of other staff salaries or subcontractors costs or raw material costs could block them from making a claim.

As start-ups begin to make money, founders will often opt to pay themselves through dividends, which can keep the eligible costs below a reasonable level for making a claim. 

How we support our start-ups

We like to help our start-up clients by helping them understand the best ways to fund their business and guide them through the implications of funding decisions. This can be invaluable in aiding their success.

Get in touch 

If you want to discover more about innovation funding and R&D tax relief claims, contact us today or give us a call on 033 000 20010.