Weathering the retail and wholesale storm…with an R&D tax break

Weathering the retail and wholesale storm…with an R&D tax break

When you think about research and development (R&D), does your mind conjure up an immediate picture of a serious-looking person in a white lab coat, mixing a complicated formula?

Many believe that innovative R&D is limited to only the most specialised industry sectors, or technically intricate businesses.  However, in reality, R&D is a little-known example of government support that could benefit a great many industries.

It is well-documented, for example, that the retail and wholesale sector is in the midst of a storm. Brexit uncertainty alone has seen consumers exercise dramatically increased caution over their spending, both online and on the high street.

With over 1,265 retail store closures in 2018 alone, not to mention scores of jobs at risk, it would be fair to say that the outlook appears to be bleak.  Retail businesses, therefore, may particularly benefit from taking full advantage of the R&D support provided by HMRC.

In summary, there are generous tax breaks available to innovative businesses that undertake R&D.  This description can apply to the retail industry far more easily than it may first appear.

HMRC guidance states that qualifying R&D work “must be part of a specific project to make an advance in science or technology”.  In retail terms, this could translate into first identifying a specific process or product, then analysing where improvements could be made.

It could also mean taking a wider view of the sector, to identify new processes or products that could be researched or developed further.

Examples could include manufacturing, stock control, product development, and e-commerce.  Indeed, successful claims have already been made in relation to software development, stock control, specific design work, and sales activity.

More precisely, businesses looking to develop their website with a new application, or deliver an improvement to an existing one, may well qualify for R&D relief. Customisable products and services are a growing e-commerce trend that often requires considerable R&D input, while the management of big data, stock control, and sales activity are prime areas to be capitalised upon.

Better still, tax credits can be claimed on payments made to subcontractors, such as software developers, who assist with R&D projects, meaning businesses don’t have to field complex tasks to their own, often overstretched, staff.

Against such a challenging environment, innovation is almost certainly key to survival in the retail industry. With HMRC keen to encourage more investment in R&D (according to the Office for National Statistics, the average UK consumer industry expenditure on R&D is just 2%), the time to invest in that big business idea could well be now.

Rickard Luckin’s dedicated Retail and Wholesale sector teams and in-house tax specialists can help your business in identifying potential for R&D tax relief, as well as helping to maximise profit in key business areas.  To find out more, please contact us.

Mark Brooks
Audit and Accounts Manager
Email Address:
Tel: 01268 983917