“MYTHS ARE FUN, AS LONG AS YOU DON’T CONFUSE THEM WITH THE TRUTH.”  Richard Dawkins, Biologist

R&D Tax reliefs are government incentives aimed at stimulating UK innovation through increased spending in R&D.  The schemes are administered through the tax system, therefore, to make a claim, an organisation has to be registered as a company subject to UK corporation tax.

What this DOESN’T mean is that the company has to be tax-paying in order to make a claim.

Where a company has no tax liabilities to pay, the credit is available for offset against past or future tax liabilities, or receivable in CASH.  Not realising this, many companies miss out on claiming.

Other misconceptive statements often made by potential claimants on why they cannot claim include the following:

  • “We haven’t developed anything new, it is an improvement to our original product line.”
  • “Problem-solving is part of our day work. How can we claim a refund on these costs?”
  • “We tried it, failed and have written the costs off.”
  • “We haven’t got a successful product yet. Work is still working on a proof of concept study.”
  • “Our competitors are already doing this work and must be claiming, so we can’t.”
  • “We are a start-up. Surely we would have to be trading for a few years before we can claim?”

The definition of R&D for the purposes of these incentives is fairly broad.  What may be deemed as complex problem solving or part of the “day job”, may constitute R&D eligible activities.

Additionally, the development does not have to relate to a new product – appreciable improvements to existing products/processes may also qualify.

It is also worth noting that success is not a criteria.  Unsuccessful attempts may constitute eligible activities and the eligible costs relating to these can be claimed.

There is also no lower limit on expenditure incurred before a claim can be made.

SO WHAT ELSE IS STOPPING YOUR COMPANY FROM MAKING A CLAIM?  CALL US TO CLARIFY  YOUR QUESTIONS.

WHAT ARE THE BENEFITS OF CLAIMING?

Under the UK R&D Tax credits scheme, SMEs can claim an additional tax benefit (for offset against their tax liabilities) just shy of 25p/£1 spent on R&D eligible activities.  For companies with no tax liabilities to pay, the benefit is receivable in cash, which can be up to 33.35p/£1 of R&D expenditure.

For large companies, the benefit is around 10p/£1.

The above schemes are essentially a partial refund by the government on costs incurred by a company on eligible R&D activities.

There is a separate scheme for capital expenditure incurred on R&D or for assets used in/providing facilities for providing R&D.  There are certain nuances within this, so it is best to seek advice in regards to this.

DON’T BE DELUDED BY MISCONCEPTIONS, UNRAVEL THE TRUTH!  CHECK IF YOU ARE ELIGIBLE TO MAKE A CLAIM.