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Are Graphene Companies Missing Out on R&D Tax Credits?

Posted By Dexter Johnson, IEEE Spectrum, Friday, August 16, 2019

Technology-based start-up companies typically have teams that know a great deal about the underlying technology and may have fully educated themselves on the commercial markets that they’re targeting for their products. However, knowing the intricacies of different funding mechanisms, or the finer points of corporate tax law, typically are not their strengths.

For the past 22 years, Leyton has been offering an international portfolio of clients a way to maximize the government funding initiatives that are available to them that they may not even be aware of.

Recently, Leyton became a Corporate Member of The Graphene Council and this gave us the opportunity to ask them about their business and what they can do for companies that are trying to succeed in commercializing graphene. Here is our interview with David Marinofsky – Senior R&D Tax Consultant at Leyton.

Q: Can you explain a bit of how your company works and what you provide your clients?

A: Leyton is a global innovation funding consultancy dedicated to helping our clients improve their business performance through utilization of research and development (R&D) tax credits. Our in-house  team  of  highly  experienced  scientists,  engineers,  tax  consultants  and  attorneys produce innovative and sustainable strategies to achieve the maximum eligible financial return, without impacting on a company’s core business or security. We save our clients’ time and generate a tax benefit while maintaining the highest quality of service. We achieve this by adapting to our clients’ environment and time constraints, and by minimizing their involvement, so they can stay focused on their core functions. Leyton only charges a fee if a credit is identified. We follow a clear methodology built on tested know-how and in full compliance with current legislation.

 Q: Essentially, then, your company assists innovative companies in reclaiming R&D tax credits. Could you outline the countries and regions that offer R&D tax credits for companies in the graphene sector?

A: R&D tax credits are offered globally, and can be applicable to various industries, including Material Science, Aerospace, Energy, Electronics, Medical Applications, Automotive, Construction, and many more. Companies developing the graphene material itself, new graphene-based processes or graphene-based products, will all be eligible, irrespective of what industry they operate in. Thanks to Leyton’s 25 regional offices in 11 countries, we are able to work closely with our clients, while our international presence gives us a strong global footprint, diverse sector expertise and the ability to benefit our clients on a global scale.

Q: How can companies take advantage of these tax strategies? What is required to qualify?

A: Regardless of industry, size, or revenue, any business that performs activities that meet the following four-part test may qualify for R&D tax credits:

1)    Technical Uncertainty: An activity performed to eliminate technical uncertainty encountered in the development or improvement of a product or process, which includes techniques, formulations, and inventions.

2)    Process of Experimentation: Activities undertaken to eliminate technical uncertainty where one or more alternatives are evaluated and is typically performed through modeling, simulation, systematic trial and error, or other methods.

3)    Technological in Nature: The process of experimentation fundamentally relies upon the hard sciences, such as chemistry, engineering, physics, biology, or computer science.

4)    Qualified Purpose: The research and development is performed with the purpose of creating new or improved product(s) or process(es) (computer software included) that results in increased performance, function, reliability, or quality.

 Q: Do you have an estimate of how much tax credits can a company might recoup based on their revenues or size?

A: A company’s size or revenue are not main determinants of the credit. Typically the best indicators are the amount of technical salaries and research and development related consumables that are incurred by a company during any given fiscal year. The bigger the pot of qualifying expenditures, the larger the credit will typically be. At the Federal level it is typically around 10% of the qualifying expenditure identified per year, but it is not always a simple 10% calculation due to the incremental nature of the credit. This credit can be used to reduce your current year tax bill, creates a refund if you are submitting on an amended return or can be carried forward for up to 20 years.

 A further determining factor can be in what state the company is located. Many states offer their own R&D credit with the qualifying criteria typically matching that of the Federal credit. As each state has control of their credit, the rates of return will vary but can be at the same level as the federal credit. The great thing is, the state and federal credits are separate, so you can claim them both together!

 A further thing to take note of is that there is an alternative way to realize the credit for qualified small businesses. As early stage companies who were highly innovative but incurring losses could not benefit from the standard credit, the payroll credit was brought into effect. The qualifying activities and expenditures remain the same, as does the amount of credit you receive. However, instead of reducing your income tax liability, which you don’t have, you are able to reduce (and potentially eliminate) your quarterly payroll tax bill. The great thing is, these companies nearly always have employees and a payroll tax bill!

 Q: Do you have an example of how some innovation companies have benefited from your services?

Companies have benefited directly by having the ability to put additional funds back into their business allowing them to hire additional staff, purchase new equipment, or securing a valuable tax credit to reduce their future tax bill. Our experience has shown that this is a perfect benefit for companies no matter what their current stage of growth. Any way to create additional funding is vital for businesses and we understand that, we also understand that your business should be your focus. That is why at Leyton we constantly monitor market developments to provide the most up-to-date funding solutions for our clients, delivered as efficiently as possible.

If anyone has any further questions about our services, our contact details and social media links are covered below:

  Website: www.leyton.com

Email: dmarinofsky@leyton.com

Phone: +1 (347) 417 – 0970.

Facebook: https://www.facebook.com/leytonusa/

Twitter: https://twitter.com/LeytonUSA

LinkedIn: https://www.linkedin.com/company/leyton-usa/

DISCLAIMER: The Graphene Council does not have ANY financial interest in, and does NOT receive any commissions, participation or any other remuneration connected to Leyton client engagements. Please contact Leyton directly for information on how to obtain R&D Tax Credits. 

Tags:  funding  investment  start-ups  tax credits 

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