Do you qualify for a Research and Development tax claim?

Don’t immediately say no because you’re not a rocket scientist.  Business owners often miss this valuable Research and Development (R&D) tax break when they are actually entitled to it for their business activities, simply because they’re not aware of it or they think they won’t qualify for this specific tax relief.

In fact, you may be able to get an enhanced deduction of 130% of your R&D qualifying expenditure. Even loss-making companies can, in certain circumstances, surrender their losses in return for a payable tax credit of 14.5% from HMRC.

And you genuinely don’t have to be an astrophysicist to claim it!

Just as it says on the tin, if you’re researching or developing an innovative  product or an advance in your field, R&D is a tax benefit you may be able to claim.  And it doesn’t have to be your main business – something you do within it may qualify.

Believe it or not, you can even claim it for a project that’s been unsuccessful. And, as an added bonus, you may be able to claim Corporation Tax relief too!

There are different types of R&D relief depending on the size of your company and whether or not the project has been subcontracted to you – don’t worry – we’ll help you work out the correct amount.

Examples of successful R&D claims

  • As an example, one of our clients manufactures ink, and we claim a proportion of all their staff costs relating to the lab for certain types of inks they produce.
  • A civil engineering contractor was able to claim for work on a university campus because the project changed mid-way, meaning more research was needed to complete the work.
  • A FinTech company has used data to create an online platform that recognises people’s identities through voice and face recognition software.
  • A firm of architects designed a sports facility with a “floating floor” to enable a warm climate had to co-exist with a cold one.
  • A company has designed a way for chocolate products to be movable – such as chocolate cars with wheels that turn.

What counts as R&D?

  1. Firstly, to qualify for R&D relief, your work must be part of a specific project to make an advance in science or technology. You can’t claim this tax benefit for something that’s classed as a social science, like economics, or anything in a theoretical field, such as pure maths.
  2. The project must relate to your company’s trade – either an existing one, or one that you intend to start up based on the results of your research.
  3. Your project may research or develop a new process, product or service – or it can improve on an existing one – like the ink our client produces.
  4. Your project must aim to create an advance in the overall field, not just for your business. So it can’t be a case of you using an existing technology for the first time in your specific sector.
  5. The process, product or service you’re developing can still be counted as an advance if it’s been developed by another company but isn’t publicly known about or available to buy.

Let’s see if you qualify…

  1. Do you undertake any projects which require you to resolve a technical issue or uncertainty?
  2. Does the uncertainty you need to overcome require you to fund a resource dedicated to the project or invest time and money?
  3. Do you have a USP which may take several attempts to get right – if it is at all solvable?
  4. Are you ‘re-inventing the wheel’ in any of your activities by using new materials or a different approach?
  5. Do you have to write special programs, or operate systems or algorithms to integrate systems and solve a problem?
  6. Have you undertaken a project to significantly improve an existing product beyond the current state of knowledge in your field or the industry standard?

If you have answered YES to any of these questions, you may be able to claim R&D.

Here are some examples of projects that usually qualify:

  • Manufacturing – Improving a manufacturing process in terms of speeding the processing times or reducing wastage
  • Architecture – Creating ‘appreciably improved designs’ for eco-homes, getting around site constraints or using new materials
  • Construction – Developing new and improved construction materials or methods
  • Software development – Creating a new version of a software product, updated platform integration, or bolt-ons
  • Restaurant – Developing improved cooking processes
  • Food manufacture – Developing an improved system for adding water to meat products, improving processes for packaging, shelf life or seasonality
  • Brewing/distilling – Improving the process.

Here at Nordens we’re completely clued up on all the relevant features of this tax credit to make sure you benefit from it fully.  We’ll support you throughout your claim and ensure your finances for the project are allocated in the most tax-efficient way.