What is R&D Tax Relief?

What is R&D Tax Relief??

According to the HMRC R&D Tax Relief is: “a Corporation Tax (CT) tax relief that may reduce your company’s tax bill if your company is liable for CT or, in some circumstances, you may receive a payable tax credit.”

“The Research and Development Expenditure Credit (RDEC) scheme was introduced in the Finance Act 2013 — it enables companies with no CT liability to benefit through a cash payment or a reduction of tax or other duties due.”

We have seen and heard various explanations or excited claims with regards to the R&D Tax Relief available to businesses within the UK. There are differences in schemes operated according to whether the company is small or large.

This guide has been created to deal with small companies, that is: ? staff headcount less than 500 ? either turnover less than €100m or balance sheet total less than €86m.

Quite simply put, Research and Development Tax Relief is a government incentive that rewards businesses for investing in innovation.

This relief and support positively impacts on the cash flow of your business, either by relief or by providing you with a cheque as you continue to invest and grow your business. Originally introduced in 2000 for SMEs, the scheme has developed and improved since then, albeit still very much under some business owners’ radar.?

Why the Government offers R&D Tax Relief??

In their own words, this incentive was introduced to “encourage innovation within the United Kingdom” by supporting the SMEs in the UK to invest and be able to afford to invest in innovation and the future. There are countless positives including job creation, wealth and tax revenues from growing successful businesses and stamping the UK Business mark on Europe and the rest of the world.

What projects qualify for R&D Tax Relief??

Often, the following explanation for HMRC is read in isolation:

“R&D has a specific statutory definition for the purposes of R&D tax relief which is not the same as the commercial, engineering or accounting definitions. To qualify the company must be carrying out research and development work in the field of science or technology.”

However, the very next line in the guidance doesn’t get the chance to always be read but it says, “The relief is not just for ‘white coat’ scientific research. This can include creating new processes, products or services, making appreciable improvements to existing ones and even using science and technology to duplicate existing processes, products and services in a new way”.

When you read those sentences together, there’s a bit of a light bulb moment isn’t there?

The phrases such as ‘in the field of science and technology’ are often enough to put off the logistics company or the clothing manufacturer and retailers, however, whatever field or sector you are in, consider for a moment the phrases such as “this can include creating new processes….. making improvements to existing ones….” perhaps then consider what that actually means.

?As a definition, it is almost purposefully broad, so as to allow businesses throughout the UK to take advantage of the incentive and benefit from the support. The guidelines published by HMRC unsurprisingly run into ‘volumes’ of pages, however, reflect on ‘creating new processes… and making appreciable improvements to existing ones… using science and technology ...in a new way’.?

Consider the re-engineering of processes within your business that deliver Service enhancements, IT integrations and improvements or innovation in how you deliver your market projects. If you and your business are taking a risk in resolving these issues, then it is possible your project will qualify. Or if you’re not sure whether what you are attempting with regards to processes etc. is even possible, then that probably qualifies.

According to HMRC, it is likely to qualify if it produces an advancement in science, with science being “the study of the nature and behaviour of the physical and material universe”. Your business and industry being the universe.

If you are unsure if your project qualifies for R&D Tax Relief, one of our advisors would be glad to have a chat with you.

Does my project qualify for R&D Tax Relief?

Call one of our advisors on 0333 4567 160 to find out more