17 Aug 2023

Failed R&D Projects: Can you claim Tax Relief?

Ian Davie
Senior Consultant

Innovation can seem extremely scary, it can be challenging to balance the positive effect of successful innovation with the possible risks. Particularly now in the economic climate, funds are limited, and being smart with your innovation enterprises is crucial. 

One of the brilliant ways that project managers can receive funding for their research and development (R&D) projects is through claiming R&D Tax Relief. Successful tax claims will provide businesses with finances to move future projects forward and keep innovation more financially sustainable. The good news is, even if an R&D project fails on paper, it’s likely you will still have the opportunity to claim R&D Tax.

 

Can you still claim tax relief for unsuccessful R&D projects? 

The quick answer is yes. The whole premise behind Research and Development focuses on building a project that can only be developed with R&D. When a company has used all of its own study and knowledge resources to try to solve a problem, but simply cannot, R&D is brought in. Regardless of whether a project then fails, HMRC clearly states that you can still claim tax relief. 

Even if the advance in science or technology sought by a project is not achieved or not fully realised, R&D still takes place.” 

(Para. 10 – ‘Guidelines on the meaning of research and development for tax purposes’) 

When youre undertaking R&D within your company, there is no guarantee of project success, this is why you are furthering your testing and research by using R&D. Claiming tax relief for failed R&D projects is not only allowed, but is encouraged as a policy under the R&D Tax Credits Scheme. 

Innovation is a risk. And failed R&D projects could still lead to a solution for a future problem or a redevelopment of the original project. R&D tax credits were made available as a way to counteract failure. It’s crucial that you do not view R&D tax credits as a reward for success; they are meant to be viewed as an incentive to develop projects and encourage businesses to take risks.

 

How are failed projects still valuable?

Though it can be difficult when a project ‘fails’, unsuccessful R&D projects provide a lot of valuable information. Most of the big, successful projects likely had a significant amount of failure along the way. The risk of failure can seem daunting at first, but tax relief can help companies stay afloat and still receive some form of funding to ensure they keep moving forward. This is exactly why the R&D tax scheme was created, to lessen the risks regarding innovation projects.

In the current times, though risk can seem very scary, innovation is also at its peak. By continuing to develop old and new ideas, you can help your business get ahead of the curve. With all of the uncertainty surrounding the economy, the innovation process right now is the key to survival. Company innovation can look different for every business. Innovation management can be put in place in a variety of ways. This could mean changing your business model, improving company culture, technological change, design theory change or even restructuring your company operations.

 

What funding is available for failed R&D projects?

R&D Tax Relief is one of the most profitable and consistent ways to help fund R&D projects, even the unsuccessful ones. If a company can take on board everything they have learned from their failed projects, they have the potential to turn them into successful ones down the line. Like Edison inventing the lightbulb, sometimes a few failures can lead you to success. 

Learning from unsuccessful R&D projects could also spark new ideas, or ideas or could even challenge the processes and the way you look at a problem. Sometimes a particular approach could result in failure, but by learning and developing further, your ideas could turn into a success in the future. 

By utilising R&D tax relief, you can continue your research into both new projects and new variations of failed projects. The possibilities are endless. Having this funding to fall back on encourages businesses to adopt a behavioural switch, in which taking risks and innovation is no longer as daunting as it once was. 

Innovation sparks and encourages more innovation. As you invest in your company and your ideas, youre more likely to keep investing and striving for greatness. This is the positive effect innovation can have on a company. Having the ability to fall back on tax relief, you also have the financial means to stretch further and find new possibilities, advances and opportunities. 

 

How can TBAT Innovation help you today

At TBAT, we work with UK businesses that have invested in innovation and completed R&D, to claim back funds to help support current and future innovation and project management. By applying for R&D Tax Credits, your company has the chance to receive money towards company expenditure regarding your R&D projects. This can be an incredible help for future innovation, by eliminating part of the financial risk. 

Not only can you claim for the current financial year, but for the two previous years as well. This means that your company could have crucial funding in your pockets to push forward future R&D projects and activities. TBAT is here to support businesses through their R&D claims, to ensure you get as much money back as possible. Filling out a tax claim can be extremely frustrating and time-consuming, at TBAT we do the work so that you can receive the credit. 

By simplifying the tax claim process for you and having an expert team of consultants with knowledge in a wide variety of science, engineering, software and healthcare disciplines, we are fully equipped to help your R&D Tax Claim succeed. To find out more about how TBAT can help, contact us today. 

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