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Definition of R&D Tax Credits and Explanation of Qualification of Industries
Research and Development (R&D) tax credits are the tax reliefs allowed to the most innovative enterprises, with a goal of promoting innovation levels in the economy, but, like RDP Associates explain, many of the eligible businesses have no idea they qualify for them. Over the past few years, R&D tax credits relief has grown its popularity whereby the number of claims filed have been increasing.
The program works by reducing the tax bill of the innovative company by an excess of the percentage of the R&D expenditure, meaning that the costs in it are free from taxation. Even though this program is effective and cost-cutting, companies are not making maximum utilization of it because of eligibility concerns where some believe that the program is a scam, procrastination, limited resources of the company or HMRC concerns.
According to the RDP Associates, there are 6 Ps that determine eligibility which are; whether the company has new or improved Products, processes, whether there are prototypes, whether the company employs professionals in technical fields, whether there are patents issued to the company and whether the company has experienced developmental and design problems. According to RDP Associates, the industries explained below are in a better chance of getting these reliefs.
The first and main industry benefiting from this is the software industry ,which should be in a state of designing of electronic interface and relationship of software modules, based on their roles, designing the architecture of their software process and product, have written source codes, determining the means of assembly, have a proper waste disposal process from their structure, testing the designed software, and explaining the alternate materials.
The second industry is that of architecture and should meet the condition of being in a position to come up with schematic designs, design energy efficient structures, develop facades, design systems for building and have a great site plan that brings together all the other features.
Manufacturing is the other industry and it must also meet the conditions of practicing and being able to come up with unique computer-based control programs for number, 3D solid modelling, design to test prototypes and tools and equipment.
Lastly, the consumer packaged goods and food industry also benefits from this tax relief program but must be in a position to frequently release new designs of packaging and preserving products, test prototypes for analytical qualities, come up with new recipes for new food products and flavorings, come up with a new production process, and improve the texture, appearance and color of the existing food products.
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