20 Feb 2024

Why do UK companies miss out on R&D tax relief in the UK?

Mark Robbins
Senior Consultant

Why do UK companies miss out on R&D tax relief in the UK? 

In the dynamic realm of business innovation, the Research and Development (R&D) Tax relief scheme stands as a golden opportunity for companies to recoup a portion of their investment in groundbreaking projects. 

TBAT Innovation is not just another team of R&D Tax Consultants. We’re a group of passionate individuals, each of us armed with degrees in STEM subjects, ranging from BSc to Ph.D. level. But it’s not just about the qualifications, it’s about the experience, and with over 15 years of operation in the R&D Tax credit space, we’ve got plenty of that. 

Throughout our journey, we’ve stayed at the forefront of the industry, always keeping up with the latest changes from the UK Government. It’s this commitment to staying ahead of the curve that sets us apart. But we’re more than just a team of consultants. We’re your partners in innovation, ready to support your business every step of the way.  

Despite its potential to enhance financial returns and stimulate innovation, numerous businesses are not taking advantage of the R&D Tax Relief scheme and how valuable it can be.  In this blog post, we’ll delve into common reasons why companies might be missing out on claiming R&D tax relief or not maximising their claims. 

Misconceptions about Eligibility: 

“If it sounds too good to be true, it probably is… Right?!” 

A misconception is that only large corporations with dedicated R&D departments qualify for relief. In reality, businesses of various sizes and industries, including Small and Medium-sized Enterprises (SMEs), may be eligible if they engage in qualifying R&D activities. 

If your company has completed work to research or develop a new process, product, or service or improve on an existing one, it could be eligible for the scheme. While activities of this kind can be considered for the scheme, they still need to be verified against the legislation published by the UK Government. That’s where TBAT’s team of experts can help to identify eligible activity in your company in a free initial consultation.  

Lack of Awareness: 

SME Scheme? Never heard of him… 

Many businesses are simply unaware of the R&D Tax Relief scheme and its potential benefits. This lack of information results in missed opportunities when it comes to R&D Tax credits, as companies may not recognise their qualifying R&D activities and, consequently, fail to initiate the claims process. 

TBAT delivers several online and in-person events throughout the year, such as themed webinars, and our increasingly popular Partners & Pastries events held at locations throughout the Midlands. We also offer a Partner Referral Scheme that enables our clients to support their partners, through TBAT, to access sources of innovation funding. 

Our objective is to expand our network of connected companies, share knowledge, and increase awareness of the funding opportunities available. So spread the word, and know you are welcome to attend any of our events if you would like to learn more! 

Perceived Inapplicability to Specific Industries: 

Not in this industry, we just make widgets! 

Certain industries might believe that R&D tax relief doesn’t apply to them. However, the scheme is designed to accommodate a wide range of sectors, and businesses. In the financial period ending March 2022, Government statistics showed that the top three sectors claiming R&D tax credits were: 

  1. Information & Communication. 
  2. Manufacturing. 
  3. Professional, Scientific & Technical. 

This didn’t come as a surprise! However, in addition to the three sectors claimed above, businesses operating in 17 other sectors made claims. For example, businesses in the Agriculture, Mining, Construction, Defense, and Healthcare sectors were all claiming. 

The takeaway from this is that companies operating in many sectors may be eligible for the R&D tax credit scheme. But, crucially, the company must be carrying out a project that seeks an advance in science or technology in their sector. TBAT’s capable team of consultants can help you verify your business’s eligibility for the scheme. So please reach out if you think you have been doing cutting-edge or disruptive development in your field. 

Fear of Complexity: 

I don’t have the time to make sense of the guidance. 

The process of claiming R&D tax relief can be complex, discouraging businesses from pursuing it. While navigating the guidelines may seem daunting, seeking assistance from R&D tax specialists can simplify the process and ensure accurate and successful claims.  

TBAT’s team of consultants pride themselves on their ability to simplify the process for our clients. Drawing on our years of experience, we can guide you through the process to build a robust claim, freeing you up to continue focusing on your innovative R&D. 

Assuming Low Financial Impact: 

Take care of the pennies and the pounds will take care of themselves. 

Some businesses may undervalue the financial impact of R&D tax relief and how it can benefit their business. The relief can result in a substantial reduction in tax liabilities or even provide a payable tax credit, significantly contributing to a company’s bottom line. Recognising the financial benefits can incentivise businesses to explore the opportunity. 

Further to this, while your first claim may seem insufficient, completing successive claims enables you to understand the process, and enables TBAT to build a relationship and understanding of your business. So future success can be harnessed as your company grows. 

Accessing expert advice can minimise the time taken you need to invest in building the claim; with TBAT involved, your claim will be completed more efficiently, leading to a greater overall return. 

Underestimating Qualifying R&D Activities: 

It was Susan in the lab with the tweezers… Or was it Derek in the workshop with the hammer? 

Companies may underestimate the scope of activities that qualify for R&D tax relief. It’s not confined to traditional scientific research; innovative advancements in processes, products, or services can also be eligible. Understanding the broad definition of R&D activities is pivotal to making accurate claims. 

TBAT prides itself on the fact that our consultants have previously worked in industrial R&D settings. We’ve been there, done that, and got the t-shirt. TBAT pairs you with a consultant who has a complementary background to your company, enabling them to quickly understand your processes and appreciate the reach of R&D in a business.  

Our vastly experienced consultants efficiently review the company’s activities to maximise the claim within the guidelines, meaning you get what you are eligible for. No more, no less.  

Overlooking Previous Projects: 

I can’t remember what I did last week, never mind what we did two years ago! 

Companies may fail to realise that R&D tax relief is not limited to ongoing or future projects. Claims can be made for qualifying activities undertaken in the past two accounting periods. Overlooking this aspect means missing out on potential retrospective claims. 

One thing that can support retrospective claims is maintaining a reasonable level of documentation, including financial logging. Some firms will have this process baked into their project management process, or it may be standard practice in the line of work. However, this is not always the case, particularly when development isn’t formalised as a stand-alone project. 

When engaging with TBAT for the first time, our experienced consultants take a deep dive into the work completed by your organisation. As our team members have a wealth of industry experience, they are capable of quickly picking up what you do as “we know what R&D looks like.” Throughout the process, we provide support and suggestions for documenting your future work and finances, benefitting your R&D tax claim and your internal business analysis.  

Inadequate Communication within the Organisation: 

Dear person I’ve never heard of, no I will not divulge what R&D we have been doing 

Poor internal communication about the benefits and implications of R&D tax relief can hinder the claims process. Ensuring that relevant departments are aware of the potential advantages can facilitate a smoother and more coordinated approach to making claims. 

Particularly in larger organisations, it is crucial to communicate the value of the R&D tax credit scheme to the business and that the process your staff is supporting is beneficial. Without complete buy-in from your organisation, the chances of capturing everything for the claim are less likely. TBAT helps in the early stages to engage your technical champions, setting the stage for a successful claim and future relationship. 

Final Words 

Claiming R&D tax relief in the UK is a strategic move that can significantly impact your business’s financial health and innovation capabilities. It may appear to be a mysterious beast at first glance, but rest assured, you are in safe hands with TBAT. There’s nothing to lose and a lot to potentially gain in exploring R&D tax credits for your business. 

Did any of the points above strike a chord with you? Want to know more? 

If so, please don’t hesitate to reach out to us, we would be thrilled to hear your perspective or answer any questions.

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