The first question that comes to our mind when we hear the words “R&D” is, “Is it possible to claim R&D tax relief for unsuccessful R&D projects?” The second question that follows is, “What are the factors that can make a project unsuccessful?” Successful projects can be defined in different ways. The success of a project relies on the level of efficiency and effectiveness achieved with the resource. A failed project, on the other hand, does not only mean a loss in the resources invested but also an expenditure of resources which could have been effectively utilized.
To claim this tax relief, the project must have been designed in a way that maximizes its potential of generating revenue. This involves ensuring that every single cost involved in the project is accounted for and all expenditures are scrutinized. In short, every single penny spent is accounted for so as to ensure that the total expenditure is not excessive and that therefore, the project is being claimed for its profit rather than for its costs. If an organization is successful in achieving the objectives of a project, then the resources spent are accounted for and thus the project is granted with tax rebates.
The level of success of a project is measured over time. It is important to analyze a project over time so as to see how it fares in comparison with the set goals. This will enable an organization to decide whether the project is being successful or not. If successful projects continue to perform at a high level over a period of time, then it is highly unlikely that the project has been successful. At the same time, if it continues to perform below the set goals, then it is highly likely that the reasons for its performance are financial in nature and that the rebate is being awarded on that basis alone.
There are two types of statistical analysis that can be used in assessing the success or otherwise of a project. One of them is discounted cash flow analysis. In this method, actual costs of implementation and results of operations, over a period of time, are calculated. Once the actual costs are accumulated, then an estimate is made as to the revenue generation potential of the project. If the results show a loss at the end of one year or if the revenue earned per year is less than the cost per year, then it is not possible to claim r&d tax relief for the project. If the result is positive, then it is possible to claim a rebate on the expenditure.
A second method is known as the impact evaluation method. This is used when calculating the rebate claim. It involves a thorough assessment of the value of the project. If the value is high enough, then it is possible to get a good rebate and if it is low, then the government will have to make good savings on its expenditure.
How is it possible to claim r&d tax relief for unsuccessful R&D projects? How can the successful R&D projects be justified to receive tax rebates? These are just some of the questions that come up in the mind of the experts. They try to work out answers for these questions and arrive at a sensible compromise between the requirements of the taxpayer and the requirements of the government.
To claim r&d tax relief for any project, the required documents need to be submitted with the application form. The required documents are then examined carefully by the assessor to ensure that they fall within the guidelines specified by the government. If these documents do not contain the required information, the application cannot be approved and will be returned as incomplete. It is important to understand that the assessor is well aware that the taxpayers may be able to claim tax relief for their unsuccessful R&D projects but most of them are hesitant to do so. This is why it is advisable to start the process with the help of professional advisors.
There are many advisors who work as consultants for the taxpayers. These professionals can help you in claiming tax rebates for your R&D projects. You may have to pay a little higher fee for their service but the tax rebates you get will definitely be more than what you would get from any other way. If you are successful in getting tax rebates, it is important to keep detailed records of every single transaction related to the development of the product or technology. These records can be kept with your personal computer or they can be stored in an external storage device. Before claiming tax rebates on the basis of successful R&D projects, you must be sure that you have followed all the legal procedures and requirements.
This Article is Written by Ahmed Niaz