The Research and Development Tax Credit was formed by HMRC to encourage firms in the UK to undertake more projects which can advance knowledge in science and technology. Under the R&D tax credits scheme, a company involved in qualifying R&D activities can either reduce the amount of tax it pays or provide a cash sum upfront. The size of your business will ultimately define which R&D Tax Credits you are eligible for and how much you can claim. Nonetheless, every business registered in England and Wales is eligible to claim either the Small and Medium-sized Enterprises (SMEs’) R&D tax relief scheme or the Large Company R&D tax relief scheme provided they are undertaking eligible R&D activities.
The work constituting ‘eligible activities’ for R and D Tax Credits purposes is widespread and diverse, but all qualifying projects follow a similar configuration – the project needs to be seeking a technological advance and have a component of uncertainty (requiring ‘trial and error’). In essence, if you are a firm who is creating new or improved products or services – and the development involves investing in a degree of experimentation or prototyping (whether it fails or not) – there’s a high likelihood you may be eligible for R and D Tax Credits. Therefore, at the very least, companies should be enquiring or asking questions about their eligibility.
In fact, the Research and Development Tax Credit is much more broadly applicable than people realise and is in no way industry-specific. Example R&D activities include:
- Software development;
- Designing new products;
- Engineering;
- Products with new materials/ingredients/resources;
- Modifying manufacturing processes;
- Enhancing existing products or technologies.
Essentially, if your company is taking a risk by innovating, improving or developing a process, product or service, then there is a high chance you will qualify for R and D Tax Credits.
Contact us for a free eligibility assessment.
