If you are a key player in your industry, you are probably eligible to make a claim for research and development tax relief.
A claim for research and development tax relief may be available for any attempt to make any improvement to the industry standard in any field of science or technology.
In this context “technology” is a very broad term. This implies that many industry leaders already do research and development in the normal course of business, but may not realise that this can carry a substantial tax saving.
- Research and development takes place in a wide range of industries, not just software
- Research and development is performed by experts, not necessarily scientists.
- Research and development may not always be successful, but can still gain tax relief
In order to qualify for this tax relief, there are very few requirements:
- Success must not be guaranteed before work starts – there must be a degree of uncertainty
- The project must be an overall advance in a field of science or technology
- The claimant must be a company
The work can even include duplication of an advance already made, as long as the information of how to replicate it is not readily available.
What is a field of science or technology?
Science is defined by HMRC as: The systematic study of the nature and behaviour of the physical and material universe. This does not include work in social sciences, or a purely mathematical advance.
Technology is defined much more widely as: The practical application of scientific principles and knowledge.
In other words, anything being done in your business which is based in science or involves technology, where the success is not certain, may well be research and development, and may qualify for tax relief.
Examples of the wide range of projects that qualify
- A packaging company working on making takeaway boxes more eco-friendly
- A torch manufacturer integrating a sensor into their product to allow it to work hands-free
- A civil engineering company developing new technological solutions installing equipment into a new building
- Simplification of a manufacturing process to use fewer machines
- Development of a system to integrate a website with an ordering system
If you are already making a claim for research and development tax relief, other than with our assistance, you are probably not claiming everything you may be entitled to.
The majority of companies making research and development claims do not claim the maximum they would be entitled to. This is due to a quirk in the legislation which allows a claim to be made in respect of “qualifying indirect activity”.
This relates to a portion of fixed costs which can be reasonably allocated to research and development projects. This includes:
- Information services
- A proportion of staff expenses for maintenance, security, administration, and finance
- Essential ancillary activities, such as a proportion of payroll and leasing costs
- Training required to support the project
These are not always straight-forward to identify, so to identify them, we will spend the time with you to ensure we know and understand how your business works.
We offer a free consultation if you would like to discuss any of the above.