Have you done Research and Development as a result of COVID?
As the Summer draws to a close, and the children go back to school, it is the time of year when our routine begins to return to normal. This has led me to reflect on many changes which have occurred over the last 18 months as a result of our pandemic. Much of our life has changed with a greater reliance on remote working, and the requirement for maintenance of social distancing.
It is not surprising, then, that these changes to the way society behaves and acts has led to a significant response from businesses which have had to adapt swiftly to a rapidly developing and changing environment. In a large proportion of cases, this has included innovative advances in science and technology.
This means that many businesses will qualify, alongside the designated coronavirus support grants, for Research and Development (R&D) tax relief. The interactions between the grants and the relief have been covered in a previous insight, and I would like to focus on the types of projects which may allow a company to qualify for this generous tax relief, in some cases for the first time.
R&D tax relief is applicable to companies for any projects which meet the following criteria:
- They are intended to lead to an overall advance in science and technology
- There is an element of technological or scientific uncertainty
- This uncertainty cannot readily be resolved by a competent professional.
Examples of projects which may qualify
- A manufacturing firm, which has had to adapt machinery and factory lines to allow social distancing of employees, in an enclosed area
- Agricultural businesses, which may have had to mechanise in a manner which has not previously been done, in order to allow farm labourers to remain socially distanced
- Substantive changes in products to account for customer behaviour
A case study
One of the best examples of a client company who has undergone a large R&D project is that of an events company. This company provides the infrastructure to allow for organisations to arrange conferences, for example, staging and lighting.
When the pandemic first hit, these events were cancelled, and their old business disappeared. They realised that applications such as Teams and Zoom were not designed to cater for these conferences, and that this created an opportunity. In order to serve their client base by arranging online conferences, they could either:
- Upgrade existing technologies to arrange a virtual conference, or
- Create a new platform
Many technological uncertainties existed at the start of the project, as there had not previously been a requirement for this kind of conference platform, and any competitor work was proprietary in nature. The client systematically identified and resolved these uncertainties and developed a new platform.
This has allowed the business to thrive during the pandemic, and develop a new channel to market.
We worked with our client to document these processes, and uncertainties overcome. This enabled a claim for R&D tax relief on a large proportion of this expenditure to be made. The substantial tax credit received helped the company considerably with its cashflow position.
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