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Are you eligible for R&D tax credits?

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One of the benefits from the Research and Development (R&D) tax relief is that it provides support not only for profitable companies but also those companies who may also be struggling to make ends meet.​

Research and Development (R&D) tax credit overview

The R&D tax credit scheme has been developed to encourage innovation in Britain, ensuring those spending their own funds on the innovation are encouraged to do so with little tax burden.

The department of HMRC responsible for R&D Tax Credits has given the following information about eligibility:

“Your company can only claim for R&D tax relief if an R&D project seeks to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty – and not simply an advance in its own state of knowledge or capability.”

What does this mean for my business?

Put simply, if a business is taking a risk [spending money] attempting to create or develop an idea, product or service through its own research into something that is not simply to advance a method or product currently in place and used by them, then the business may be carrying out a qualifying activity thus eligible for R&D Tax Credits. 

Here are some examples of activities which have been successful in R&D Tax Credit applications: 

  • A new flavour in the snack industry
  • Changing the fermentation process in the brewing industry
  • Modifying the internal production process in the health and beauty industry
  • Modifying a car engine; this was undertaken by a construction company hence eligible as it was not deemed to simply be enhancing their own capability

What do I do next?

If you are eligible you will need a knowledgeable accountant to ensure that your records are detailed enough to provide the required information.

If you are embarking on a project to research and develop a product then you should always consult an experienced tax advisor to find out if you are eligible. 

If you have been working on an eligible project for a while, you are still able to claim R&D tax relief for your last two completed accounting periods.

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