Research & Development Tax Credits are a UK tax incentive, designed to encourage investment in R&D, which enables businesses to reduce their tax bill or claim payable cash credits as a proportion of their R&D expenditure.
R&D Tax Credits can be a hugely effective way to inject additional finance into a business, and in recent years, there has been a steady increase in the number of businesses claiming them. However, there is still a large proportion not taking advantage of the scheme and for those that are, they may not be claiming all they’re entitled to, as qualifying R&D is potentially being overlooked.
Business Development Manager, Vincent Seddon, from TBAT Innovation, who provide business support for SMEs and, in particular, Research and Development advice Nationwide tells me, “There seems to be a lack of understanding in relation to what R&D means when it comes to making Tax Relief claims, and consequently, what can and cannot be claimed.”
He goes on, “It can be difficult to navigate areas of the HMRC guidelines, and it’s important for an R&D Tax Consultant to take the time to fully consider and understand your business’s technical projects to identify all eligible activities.
In many cases, making a Research and Development Tax Credit claim is left to the company’s Accountancy firm, but do they have the experience, the time and the technical expertise to build a robust and maximised claim on your behalf?”
To make a claim for R&D Tax Credits, your business must have done the following:
Your project may result in a new process, product or service, or improve on an existing one.
Some of these definitions can be a little ambiguous, but if you and your business have said “yes” to any of the above, then you may be able to claim back some of your R&D spend.
To make an R&D Tax Relief claim, it’s important to invest time gathering relevant information in relation to your spend as this can have an impact on the claim value. It is also crucial to include technical reports to demonstrate R&D completed, focusing on the technical uncertainty faced.
Vincent goes on to explain, “It’s a long process to follow and can be quite time-consuming if it’s done in-house. Important elements can be perceived not to be R&D, and potentially be omitted, or even worse, overlooked. Using a specialist R&D Tax Credit Consultant can help avoid this from happening and serve as a fresh pair of eyes overseeing the claim.”
Vicky Strachan added, “When I work with businesses, I find that it is always a sensible approach to ensure that there is a robust IP strategy in place which takes Research and Development into account. Quite often R&D is focused on crowded technical areas and it is important to work with an IP firm to help you uncover any prior art or patents from other businesses where R&D efforts may provide limited scope.
At Mathys & Squire, we work directly with R&D teams and Technical Directors and can provide advice such as, patent searching and identification of any prior art which could be used to help companies ensure they do not embark or invest the time on developing new technologies which may, or may not be eligible for R&D claims”.
In summary, if you are not claiming R&D Tax Credits, or are claiming, but are unsure whether you are including all your eligible spend, get in touch with an Research and Development Tax Relief expert at TBAT here.
Within R&D tax credit frameworks, there exist varying degrees of guidance, each with distinct purposes. These are ‘Meaning of Research & Development for Tax Purposes: guidelines’, 'CIRD Manual (Corporate Intangibles Research and Development)' and ‘Guidelines for Compliance’
There were some important announcements made regarding the future of the R&D tax credits schemes both in structure, operation and who can benefit as well as wider investment in R&D in specific sectors.
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