How to spot R&D within your company
Do you think your company doesn’t invest in R&D? You may be pleasantly surprised… More companies qualify for R&D tax credit relief than you may first think. You do not need to be in lab coats undertaking cutting edge research to make a claim – this is one of the biggest misconceptions surrounding R&D tax relief. Activities that seem like routine business changes to you may very well be considered as R&D and could result in a cash benefit of thousands of pounds. Consider each of these points in turn, making notes of some of the technical challenges your business faced as a result – you never know, you may discover your company could qualify.
Has your company been affected by any legislative changes in the past 3 years? Make a list of the technical challenges your company faced in trying to address/react to these changes.
Are you no longer able to use a particular substance or material, forcing you to investigate alternatives?
Have changes in environmental legislation impacted your production process?
Has your company experienced any technical challenges relating to problems with existing or new suppliers?
Has your company been forced to substitute a particular material or component. Has this caused you any significant technical problems?
Have you needed to change your product or service in response to market conditions?
Changes in customer demand?
Project delays and overruns
Have any of your projects overrun, in time or costs? Was this due to technical challenges?
Has your company sought to improve its products/offering in the last 3 years? Were there any technical challenges associated with this work?
Has your company undertaken process improvement projects?
To improve quality issues
To reduce waste
To reduce energy consumption
What were the challenges associated with this work?
If you have managed to list some technical challenges that resulted from one or more of the above, then this is indicative that your company may be entitled to make an R&D tax credit claim.
The fact of the matter is you do not need to be aiming to creating a hi-tech, revolutionary product/service to qualify for R&D tax credits – this is the perception that most people have. Simply seeking to make changes and improvements to existing products and processes can qualify as R&D. If a rival has had a breakthrough, efforts to try and mimic their advance can also qualify.
In addition, it is important to remember any technical challenges that could not be overcome still qualify you for R&D tax credits. If you were unsuccessful in finding solutions to your problems, you can still make a claim.
R&D tax credits are a generous corporation tax relief available to any company in any sector. They provide profit and loss making companies with a significant cash boost. Essentially it is free cash that many companies operating in the UK are entitled to. The issue is that the most do not realise this.
When asked, most companies will say that they do not do R&D. However, they probably do and don’t realise it!
The problem is the perception of “R&D” amongst business owners compared to the definition of “R&D” for tax purposes – they are distinctly different. R&D for tax purposes is far more inclusive than most people realise. This huge gulf in perceptions is causing businesses to not realise that they could be entitled to this money.
The latest government statistics tell us that the average value of an R&D tax credit claim for an SME company in the UK is just below £62,000. Therefore, not realising that you could be entitled to this money is a very costly mistake. There is a time limit on claims, so considering whether you could claim is extremely important.
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