There are several big misconceptions surrounding Research & Development Tax Relief – we come across them on a near-daily basis. Despite it being one of the most generous corporation tax breaks available, many people rule themselves out without looking into it in greater detail. But if you do look into it, you might be surprised at what qualifies for R&D Tax Relief.
Dave Philp, Head of R&D Tax at Chiene + Tait, looks at the misconceptions you might have heard.
“We haven’t created anything new so we aren’t eligible”
This simply isn’t true: you don’t need to be breaking new scientific ground to qualify. R&D tax relief covers any project that seeks an advance in science or technology. As well as creating an innovative, state-of-the-art product, this can also mean simply improving upon existing processes. If you have:
- Been working on something that has never before been attempted;
- Tried to improve their existing products through technological change; or
- Looked to find a more efficient way to work,
then you will likely have scope for an R&D claim.
“We have received grant funding so can’t make a claim”
Not correct. However, receipt of a grant does throw a spanner into the works. You can still make a claim, albeit the grant may limit the total tax credit/deduction that you will get back. The legislation around grants and how they interact with R&D tax relief is extremely complex, so I always recommend speaking to a specialist to ensure that you maximise your claim.
“But we don’t focus purely on R&D”
R&D tax relief is available to companies that attempt to overcome technological or scientific uncertainties through the use of untried and untested techniques. It doesn’t matter if that is the company’s sole purpose, if there is innovation as part of the process, there will likely be a claim. That means that companies from a range of different sectors can qualify for relief. In the past 12 months, Chiene + Tait has worked with (but not limited to) companies in the following sectors:
- Electricity and Gas
- Financial & Insurance
- Life science
“It’s not worth the time to make an R&D tax relief claim”
Companies can receive a tax credit up to 33% of the total eligible expenditure incurred. So, if you spent £100k on eligible staff costs, you could receive up to £33k tax credit, cash in hand
Granted, the rules and application process is complex and can seem daunting, but you can remove that hurdle by using a good adviser.