18 Jan 2024

Can Intangible Assets be Included in UK R&D Tax Credit Claims?  

Samuel Hutchinson
R&D Tax Consultant

Intangible Assets Concept. Folders in Catalog.

R&D Tax Credit claims in the UK serve as a vital mechanism to support innovation and drive growth for businesses. One common question often asked relates to the eligibility of including intangible assets in a UK R&D Tax Credit claim. Let’s explore this topic to uncover possibilities within the UK’s R&D tax relief scheme, alongside TBAT Innovation’s expertise in navigating this landscape.

Understanding Tangible and Intangible Assets

Tangible assets are easy to visualise as they take a physical form. Examples include buildings, equipment, land or machinery. They also have a specific monetary value, which make them easy to qualify and document financially.  

Intangible assets, on the other hand, have no physical form and cannot be touched or held. Some examples of intangible assets include patents, IP, software, unique algorithms or brand names. Whilst these examples are more difficult to quantify financially, it is clear they are valuable to a company. For example, a strong brand name can imply quality to potential customers, whilst a granted patent provides assurances to potential investors.

Inclusion of Intangibles in UK R&D Tax Credit Claims

In the context of UK R&D tax relief, some business owners assume that assets cannot be included in their claim. This isn’t the case, intangible assets can be included in UK R&D Tax Credit claims, provided certain criteria are met.

Qualifying R&D Activities

UK accounting standards distinguish between two distinct phases of work in the generation of an intangible asset.  

The first is the research phase, which refers to the original investigation into the work. This includes desk-based research, reviewing existing options and knowledge. Expenditure on this research phase cannot be recognised as an intangible asset. 

The second phase is the development phase, which is the application of the research. This involves designing, constructing, and testing of materials, devices, and products. It is work in this phase that can be recognised as an intangible asset.  

For work in the development phase, focus primarily lies on the R&D activities rather than the resulting intangible assets. For inclusion, these activities must align with the criteria set by HMRC in the DSIT Guidelines. Further, cost can only be included from the eligible cost types defined in HMRC’s Corporate Intangibles Research and Development (CIRD) Manual. This is where the expertise of the TBAT team can help to identify the qualifying costs.

Direct Link to R&D:

Demonstrating a clear link between the R&D activities and the creation or enhancement of intangible assets is pivotal. It’s essential to illustrate how the R&D work contributed to the development or improvement of these assets.

Documentation and Substantiation:

Robust documentation detailing how R&D activities led to the creation or enhancement of intangible assets is important. Thorough records outlining the R&D process, milestones, and their impact on the development or enhancement of intangible assets are fundamental for a successful claim. 

TBAT Innovation’s expert R&D Tax Consultants leverage their experience to help clients to determine what is and isn’t allowed in a claim and ensure that the report substantiates the work in a concise manner.

Leveraging Intangibles in UK R&D Tax Credit Claims

Incorporating intangible assets into UK R&D Tax Credit claims demands a meticulous approach aligned with HMRC guidelines. TBAT Innovation specialises in precisely this—offering expert guidance and support:  

Comprehensive Evaluation 

TBAT Innovation conducts in-depth assessments, ensuring a clear alignment between R&D activities and intangible assets, facilitating successful claims. We work with clients from start to finish, from kick-off to submission, ensuring minimal contact time is needed from the technical experts.   

Strategic Documentation Support

TBAT Innovation’s services aid in maintaining detailed records substantiating the link between R&D endeavours and intangible assets, crucial for compliance and successful claims. Our R&D Tax Consultants have a wealth of experience in a wide range of industries. Our technical understanding makes the documentation and report writing phase smooth, with minimal fuss and maximum professionalism. 

Optimising Claims

TBAT Innovation’s expertise helps identify eligible costs within intangible assets, maximising R&D tax relief claims within HMRC parameters. We analyse clients’ accounts in fine detail and ensure that the correct sum is being claimed for. 

Final Considerations

While intangible assets hold immense value and often result from substantial R&D efforts, their inclusion in UK R&D Tax Credit claims mandates a clear correlation between R&D activities and the development or enhancement of these assets. TBAT Innovation’s professional guidance, adherence to HMRC regulations, and strategic documentation are pivotal in effectively incorporating intangibles into UK R&D tax relief claims.  

In summary, the inclusion of intangible assets in UK R&D tax relief claims is feasible but requires careful alignment of R&D activities with the creation or enhancement of these assets. Staying informed about regulations and collaborating with specialists like TBAT Innovation remains instrumental in leveraging R&D incentives within the UK’s innovation landscape. 

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