You could be forgiven for thinking that research and development (R&D) is a technical area of business that applies only to science and medicine.
But this popular misunderstanding means that R&D is often a missed opportunity for business owners to fund their companies’ progression and growth.
R&D tax relief can in fact be claimed by limited companies, in the form of either a cash payment and/or a reduction in Corporation Tax, for the development of new products, processes or services, or enhancing those that already exist.
What projects count as R&D?
A project that involved developing bespoke machinery, software, systems or processes to address a unique requirement, automating a task, or improving health and safety processes, could all potentially qualify for R&D tax credits.
Examples of R&D expenditure could therefore include staff costs (such as salaries and bonuses), employer’s National Insurance and pension contributions, payments made to subcontractors and freelancers, and some types of software.
What if the R&D project claimed for isn’t successful?
The R&D should be carried out in the genuine spirit of enquiry, and should be shown to be innovative and directly beneficial to the company itself.
As long as these criteria are met, there is no requirement for the project to be more widely successful.
How are R&D claims made?
There are different schemes to use for making an R&D tax credit claim, based upon whether the company is defined as an SME, or a large company.
An SME comprises fewer than 500 staff, and either not more than €100m turnover or €86m gross assets.
SMEs can usually make a claim via the SME R&D tax credit scheme, while large companies can claim for a Research and Development Expenditure Credit (RDEC). In some cases, an RDEC can also be claimed by an SME that has been subcontracted to work for a large company.
Is your business eligible?
As a starting point, consider the following questions. Depending on your answers, you could be eligible for a R&D claim.
- Did the project look for an advance in technology?
- Were there any technological uncertainties, problems or issues encountered during the project?
- Did the company make any attempts to overcome these uncertainties, problems or issues?
- Could the project be easily worked out by another professional in the field?
Our team at Rickard Luckin are passionate about helping innovative companies realise the full potential of R&D tax incentives, because the benefits of this are wide-reaching. The government benefits from increased productivity, which in turn is good news for both UK businesses and the economy. R&D tax credits can also lead to the development of new ideas that can affect positive change on a global scale.
As such, our dedicated sector experts assist companies across all sectors to claim what has amounted to millions of pounds in R&D funding, that may have otherwise gone unnoticed and unclaimed.
To discuss R&D Tax Relief further, please contact Jamie Nice, Tax Director at Jamie.firstname.lastname@example.org or 01702 606831