Is your business due more credit than you realise?

research-and-development

R&D tax credits are a valuable government relief which HM Revenue & Customs (‘HMRC’) is actively encouraging companies to claim across all business sectors and they can deliver substantial reductions in corporation tax payments or give a cash injection for loss-making companies.

If your company is involved in innovating, developing, refining or adding value to a process, product, device, material or services then it can qualify for R&D tax credits.

An R&D claim takes into account the time invested, including the obstacles you encounter, as you strive in the pursuit of business goals – even if you do not achieve them.

A claim can be triggered from the moment you or your staff have an idea.  So from the second you have that ‘Eureka moment’, you should start recording the time you spend on its development.

If you can answer ‘Yes’ to any of the following questions, you may be eligible for R&D tax relief:

  1. Have you developed your own software?
  2. Have you improved a process or product?
  3. Have you made any advances in science and/or technology?
  4. Have you filed any patent applications?

R&D Tax Relief Facts

  • R&D tax relief covers companies in virtually every sector including their support functions. Here are just some…
    construction; advertising; telecoms; financial services; gambling; manufacturing; energy; defence; life sciences; software; internet/communications/website/databases; professional services
  • To claim you must be a limited company
  • The tax relief is open to both SMEs and large companies
  • Even if an R&D project does not produce a positive outcome you can still claim
  • You can backdate a claim up to two years after the R&D has taken place

R&D Tax Relief Myths

  • Claiming is risky and may lead to broader tax investigations
  • HMRC does not want you to succeed so makes it hard to qualify
  • You need to own the intellectual property rights to make an R&D claim
  • “My company is too small to make a claim”
  • “We are just sub-contractors so we cannot claim”
  • “We do not work in a lab wearing white coats!”

Eligible costs

The following costs should be apportioned to the R&D project:

  • Staffing
  • Materials, water, fuel, power
  • Software directly used in the R&D project
  • Subcontracted-out R&D activities

Case Studies

It’s a misconception that only technical innovations and new product development qualifies for R&D tax relief. The following real-life case studies of less obvious R&D claims:

  • Company A was asked to install an energy-efficient commercial power generator in a residential setting. When this proved too noisy, R&D commenced to develop the generator to ‘fit’ the setting.
  • Company B working in the construction sector created a software tool to manage site reports to help track requirements under Health & Safety legislation.
  • Company C from the renewable energy sector was investigating using different chemicals to create biofuel. Whilst its attempts proved unsuccessful, it still had a claim for R&D relief.
  • Company D, a firm of architects, had developed software to improve internal processes which qualified for R&D.

R&D activities are often not obvious, but we can assist if you have any doubt as to whether you have an R&D claim, and we can confirm whether this is the case.

Assuming there is a claim we will commence a technical appraisal to support this, and establish the costs incurred in the R&D project(s). We will then submit the claim to HMRC and liaise with them until it is agreed and completed.

To get expert advice on your R&D claim, call Leonherman on 0161 249 5040, or email partners@leonherman.co.uk