Quick guide to tax relief on research and development

12th July 2019

Hi there, I’m Karen and I’m going to talk to you about R&D tax relief.

Now, if you have made it past the first sentence, amazing. Because this blog is about getting tax BACK as oppose to paying it out. And if any of you are interested in re-investing your money back into your businesses, then read on.

In case you are not already aware, HMRC don’t talk much about this topic. In fact, as much as they are happy to spit the money out, they rely on specialists in the field to spread the word and educate. Today, I’m just going to talk to you about the area of Research & Development tax relief (R&D) and some common misconceptions around claiming.

So what exactly is Research & Development?

This is where you have advanced something in your field using either science or technology.

So that means I have to be a scientist or a technical expert? No. It means HMRC are happy to reward SME’s with either a cash incentive or a deduction in corporation tax, when they have done something like the following:

graphic showing tax relief examples
  • Developed a new product/process/service to the market
  • Faced uncertainties whilst doing so i.e. It wasn’t something you could simply do or just buy off the shelf. Instead, there were challenges, risks, failures and going back to the drawing board moments.
  • A competent professional would have faced the same challenges as you faced
  • Identified a problem in your market and actively worked on a solution
  • Taken something that is industry standard but made it better/stronger/faster/eco-friendly and more

Common misconceptions?

  • Perhaps you are a start-up reading this and you tick lots of boxes above but all of your “expenditure” has come from grants and funding options and your T&C’s state you can’t claim. Well, the T&C’s are right.

But, the good news is, you can still claim through the RDEC scheme. It’s a less generous pay out than traditional SME but still very worthwhile pursuing.

  • You need to be in a lab with a white coat to claim- wrong. Check out how wide the options are above. Every sector from architect to food and drink to engineering to renewables have claimed and there’s plenty more to uncover.
  • You need to be spending £100’s of £1000’s in order to claim? Wrong – We would typically say approx £50K expenditure would suffice and this is made up of things like staff costs (salaries), subcontractors, software costs, consumables, materials, software and light and heat.
  • You need to be an established business with multiple staff and a R&D department – Wrong. As long as we can identify the link to the above examples and ensure the spend is there, it’s worth pursuing. You can even claim if you are loss making or haven’t even made a sale yet.

So there you have it, a quick 1 stop shop guide to what is R&D and the misconceptions around stopping companies from claiming.

Catax are specialists in this area and have been for 10 years. We have submitted over 14,000 successful claims to HMRC generating £221m of tax relief back in UK businesses pockets.

Don’t miss out on your chance to claim!

Thank you for reading.