In our experience, qualifying R&D claims are often overlooked because projects are not necessarily “new” or “unique”.
If a particular advance in science or technology has already been made or attempted but details are not readily available (for example, if it is a trade secret), work to achieve such an advance can still be an advance in science or technology.
HMRC qualify research and development as overcoming technological and scientific uncertainties or challenges; aiming at achieving a technological and scientific advance that couldn’t be easily worked out by a professional in the field.
Whatever size or sector, if your company is taking a risk by attempting to resolve these uncertainties, then you may be carrying out qualifying activity. This could include creating a new process, product or service, but may also include changing or modifying an existing product, process or service in order to make it better.
Routine copying, analysis or adaptation of an existing product, process, service or material is unlikely to qualify.
Research and Development (R&D) Tax Relief helps innovative businesses undertaking R&D related activity claim a generous tax deduction or a cash refund from HMRC.
R&D tax relief is a tax incentive from the UK Government designed to encourage companies to invest in R&D. The scheme has been around since 2000 and last year over 25,000 UK companies claimed almost £2.9bn in tax relief.
Profit-making SMEs can reduce their corporation tax bill by up to 230%, e.g. an additional £130 deduction on top of £100 spent of qualifying R&D expenditure.
Loss-making SMEs can choose to surrender their loss and receive a tax relief by way of a credit – a cash refund paid by HMRC of up to £33,000 for every £100,000 spent on qualifying R&D expenditure.
Partner - Corporate and R&D Tax
R&D Tax Manager