A successful innovation project is defined as an R&D process which is able to bring about new and relevant results for its commercialization. If it fails to deliver on this expectation, then the concept of an R&D tax break for such a project would become prevalent in the corporate world. The success or failure of such projects will depend on the nature of the resources available for the same. If there are not enough resources available, then the projects will fail to meet the expectations of their investors. Is it possible to claim R&D Tax Relief for unsuccessful R&D projects?
Yes, it is. There are many instances where people have claimed tax breaks under the concept of "R&D Tax Relief" in order to claim back taxes which they were liable to pay. These claims are usually made when commercial organizations invest in start up companies. However, it must be said that these claims cannot work for all such projects.
The first thing to look out for in a scheme of tax relief for such projects is its potential application. If it only offers limited tax relief, then it would not be worthwhile investing your money in it. If it is able to provide tax relief that is extensive, then the returns can easily become too high. However, it must be pointed out that even if a company invests in one such scheme, then it is not necessary that it will be able to get highly lucrative tax breaks.
It is important to point out that you would need to be very sure of the quality of the research and development being carried out in order to claim tax concession for it. Otherwise, you would need to spend a lot of time proving that your R&D activities are successful before you can claim anything at all. Therefore, it is essential for you to carry out an elaborate analysis before putting your money on the line for such projects.
Another thing that is important to point out here is that there are a few companies that provide tax break schemes for those companies who are willing to invest in research and development. However, they do not provide tax breaks for those companies that are willing to purchase their technologies. This means that there would be a need for you to prove in black and white that your technology has great value. There are also companies that claim to give highly beneficial tax breaks only for those companies that have large and multifaceted R&D departments. However, such companies would often prefer to pay a lower rate of royalty to the government in return for this arrangement.
One other thing to keep in mind when asking the question is it possible to claim tax relief for research and development is that the amount of tax that you pay to the government depends on the tax bracket that you fall under. This means that if you are in the upper tax bracket then you would get a bigger tax break. Basically, this is because you would be paying a higher amount of income tax than someone who falls in the lower tax bracket. On the other hand, if you happen to be in the lowest tax bracket then you will receive a smaller amount of a tax break than what someone else in your same tax bracket would receive.
Research and development tax breaks are given to a company according to the current market value of its assets. The companies then use the net value of its assets as the basis to determine the amount of tax that it would pay. The other thing that needs to be kept in mind is that the tax break only applies to the actual expenses incurred by the company for the development of its particular product. It would not apply to the value of any property or services acquired by the company. In other words, if a company wants to avail of these tax breaks then it would have to spend the money on its products.
So can you really claim r&d tax relief for yourself? Yes, absolutely. However, one thing you need to keep in mind is that every business is bound to pay tax on its earnings. In some cases where companies have a turnover of more than a million dollars a year, they are eligible for the tax credit. However, it is not easy to avail such concession as there are many restrictions on how companies can use them. Some companies may have to pay the concession only when they file their annual return, while others may be eligible for it irrespective of their profits.
This Article is Written by Ahmed Niaz