R&D Tax Credits: Any company, any size, any industry can claim

Think R&D Tax Credits are the preserve of massive tech conglomerates or sprawling laboratories inventing cutting-edge cures for the world’s most hideous diseases?

You’d be wrong.

Yes, of course these types of companies can claim - and claim they certainly do. In fact, latest R&D statistics show that the Professional, Scientific and Technical sectors accounted for 20%, 25% and 24% of the total amount of R&D tax relief claimed in 2019-20 respectively. However, the truth is that lucrative R&D Tax Credits can be claimed by any company in the UK that is registered for Corporation Tax, regardless of size or industry.

What are R&D Tax Credits?

The R&D Tax Credits scheme was launched by the government back in the year 2000 as a way to incentivise UK companies to innovate. Why? Because innovation not only means companies grow and employ more people, but because innovation also helps keep the UK competitive on the global stage.

So the government is very keen to encourage investment in research and development work that enables innovative projects to come to life. This is why the R&D Tax Credits scheme was unveiled, and why it’s still so generous to this day.

Essentially, R&D Tax Credits mean companies engaging in technical or scientific R&D can claim back up to 33% of their eligible R&D costs from the government. This is either as a Corporation Tax rebate or as cash credit payments if the company made a loss.

As long as the business is undertaking development activities to seek to achieve an advancement in science or technology then R&D Tax Credits will likely follow. Many businesses actually do this in their day-to-day work, from software development and engineering companies to firms working in food production.

Think your company may have carried out an eligible R&D project recently? Why not take a look at our R&D Tax Credits page for more about how to apply.

What activities can be included in an R&D Tax Credits claims?

Many businesses don’t realise that they qualify for R&D Tax Credits or that they are not claiming their full entitlement. Again, according to latest R&D statistics, the estimated total amount of R&D tax relief support claimed for the year ending March 2020 was £7.4 billion. This was an increase of 19% from the previous year. On average SMEs are claiming £46,000 each per year.

The following activities would be considered eligible for R&D Tax Credits:

• Defining technical objectives;
• Identifying uncertainties;
• Feasibility studies;
• Reviewing new and competing technologies;
• Analysing, designing and developing the technology;

In addition, certain indirect support activities may qualify for R&D tax relief, such as:

• Administration, finance, and personnel services specifically required to support R&D activities; and,
• Training to support R&D.

What type of software projects specifically qualify for R&D Tax Credits?

Common examples of software development projects that may qualify for R&D tax relief include:

• State-of-the-art software for new projects, or new functionality for existing R&D projects;
• Tools to extend the functionality of application software programs or of an operating system;
• Extensions to database software, programming languages, or operating systems;
• Software development tools, such as tools to port data across platforms, tools for image processing or character recognition;
• Novel data management techniques, such as new object representations and new data structures;
• Innovative methods of capturing, transmitting, manipulating, and protecting data;
• Software to run new computer hardware;
• Software to run on devices with pre-installed operating systems, such as handheld GPS, mobile phones, and tablets; or,
• Means of integrating hardware and software platforms.

What type of manufacturing and engineering projects specifically qualify for R&D Tax Credits?

Common examples of product and process development projects that may qualify for R&D tax relief include:

• Innovative product development using computer aided design tools;
• Development of second generation or improved products;
• Tooling and equipment fixture design and development;
• Developing unique computer numerical control programs;
• Designing innovative programmable logic controllers;
• Designing innovative manufacturing equipment;
• Prototyping and three-dimensional solid modelling;
• Designing and developing cost-effective and innovative operational processes;
• Integrating new materials to improve product performance and manufacturing processes;

Is your company eligible for the SME or large company scheme?

The R&D Tax Credits scheme is divided into two branches: the SME scheme and RDEC. Which one you should apply under depends on a few factors.

For a company to be regarded as an SME it must have a group headcount of below 500 staff and meet at least one of the following: a turnover of below €100 million or gross assets of less than €86 million. A large company is any company that exceeds the SME thresholds. However, an SME may need to use the RDEC scheme in certain circumstances, for example if it previously claimed state aid (we can advise you on this).

At this point it’s well worth familiarising yourself around SME and RDEC claims and which branch your company should use. To help, we’ve recently put together our article: SME vs RDEC: R&D Tax Credit Schemes Explained.

Why work with Myriad Associates on your R&D Tax Credits claim?

Although the R&D Tax Credits scheme is generous, applying successfully is also notoriously difficult. Rules and criteria change regularly and understanding exactly which costs you can claim for - and which you can’t - can be a minefield.

Overclaiming can easily lead to an investigation by HMRC into your wider tax affairs.

"I would say to anyone considering Myriad Associates for their R&D tax claim to get on and do it. The team are friendly, efficient and approachable and it was good to know all eligible costs were included." - David Cummins, Executive Director, TheVirtuLab.

To find out more or start your claim today, why not send us a message or call 0207 118 6045.