If you have a moment to spare before the Autumn springs us back into work mode, use it to check whether you could claw back a slice of your corporation tax as R&D tax credit. And please before you say, “that’s not relevant to me”, read on as too many people take that view in error.
R&D tax credit is not only for the techies or pharma companies and research labs of this world; it applies to a very wide range of business sectors. In fact no sector is automatically ruled out. Of course there are some sectors where companies are more likely to be undertaking qualifying development activities. A large share of the government’s R&D subsidy goes to companies in the manufacturing industries, such a food processors, drinks makers/brewers, precision engineers, electronic circuit board makers, chemical, plastic and packaging makers and companies that are developing new gadgets and widgets. It’s also quite common for agrarian, farming, construction and engineering companies to be undertaking qualifying activities.
How to check if you qualify for R&D tax relief or tax credits
To qualify you must be a UK registered limited company. If you can tick that box, there are three things to consider:
- The first is whether any of your activities (over the past two years) have involved some level of innovation. In other word you spent time, talent and/or money on creating or developing one or more new or appreciably improved product, process or service. The Government’s R&D guidance calls this ‘making an advance’.
- If your activities did involve innovation – consider whether those activities also involved dabbling in the world of physical things (things you can see, touch, taste, hear, smell) and/or software development. If they did that’s another box ticked.
R&D cash back can only be claimed for projects that involve science or technology where science is defined as the physical sciences, so it does not include work in the arts, humanities and social sciences or economics.
The kinds of activities and projects that qualify is expansive it includes projects and activities to research and develop new or much improved: software applications, technology systems, foodtech, agrifood tech, in fact any tech, gadgets, equipment, electronics, packaging, recipes, substances, materials, engineering designs, construction methods, manufacturing processes, bio-energy, life sciences, agricultural capabilities… and many other development activities.
- The third consideration is whether in seeking to develop your new or significantly improved product, process or service, you needed to experiment. E.g. build prototypes, carry out trails or do some testing to work out the best way to get your desired outcome. Or it might be that you didn’t know if it was even scientifically possible or technologically feasible to do what you want to do, until you tried it. The government’s R&D guidance calls this ‘resolving scientific or technological uncertainties’.
To meet qualification criteria you need to have faced at least one scientific or technological uncertainty. If you did and you also ticked YES at one and two above it’s very likely that you can qualify to R&D cash back.
The best and fastest way to check is to talk to a specialist. Most specialists will be able to do an initial free assessment over the phone and will work with you on a no win no fee basis.
Linda Eziquiel is one of our specialist R&D Tax advisors. She has already helped hundreds of small businesses to successfully claim back tax against their R&D activity. Could she also help you? To find out more, you can contact Linda Eziquiel.