Your Q&A – Research & Development Tax Relief

Research and Development Tax Relief is an opportunity for a reduction in corporation tax that eligible business owners can miss out on through lack of awareness and knowledge. 

This information page will help you understand:

  • “What is Research and Development Tax Relief?”
  • “What constitutes Research and Development?”
  • “How do I know if my particular project constitutes Research and Development?”
  • “How does Research and Development Tax Relief work?”

What is Research and Development (R&D) Tax Relief?

R&D Tax Relief is a Government incentive to reward UK businesses that are developing new or improving products, processes, services, devices and materials, or advancing the state of knowledge in their sector, in order to remain competitive in the market.

How do I know if my business conducts work which can be deemed to be Research and Development?

R&D is not just the preserve of people in white coats, working in a lab or sat in front of a computer wrestling with complex formulae.

R&D can apply to businesses in all sectors, as long as they are subject to UK corporation tax.

What constitutes Research and Development?

There are two primary criteria that must be satisfied for a project to qualify as R&D for tax purposes:

  1. Projects must aim to advance overall knowledge or capability in a field of science or technology:
    • You don’t have to be the first to do something.
    • Advancing the company’s own state of knowledge or capability alone, where this is widely available and understood in the field, would not qualify.
    • It must be a field of science or technology and not a market sector, i.e. straightforward implementation of an established technology for a new market would not be R&D, AND
  2. In pursuit of an advance it is necessary to have encountered technological uncertainty that required resolution as part of the project
    • Technological uncertainty exists when it is unclear whether something is technologically or scientifically possible, or how to achieve this in practice is not readily deducible by a competent professional in the relevant field of science or technology.

How do I know if my particular project constitutes Research and Development?

Answering yes to any of the following questions could mean your activities are eligible as R&D:

  • Have you developed new tools, products, services using technology?
  • Have you tried to improve your existing products through technical changes?
  • Have you had to resolve technical problems with any of your products?
  • Have you found more efficient ways to produce your products or services?
  • Have you experimented with new equipment or production techniques?
  • At the start of a project, did you ever think ‘I’m not sure of the best way to do this?’
  • Have any of your projects failed for technical reasons?

I have conducted Research and Development but this work wasn’t successful? Does this work still qualify for tax relief?

You might not be able to achieve the intended outcome because you cannot resolve the technological uncertainties. This project will still qualify for relief as long as it satisfies the criteria above.

When can I make a Research and Development claim?

Relief is calculated based on expenditure incurred in the company accounts for each accounting period, which means you can look at any accounting period where the first anniversary of the due filing date has not passed. This usually means you can look at the previous two accounting periods if they were 12 months each in duration.

How does Research and Development Tax Relief work?

For a small to medium enterprise, the qualifying costs* that are identified are uplifted by a further 130%. This will either reduce your company’s tax bill, which will be repaid to the company or create/increase a tax loss.

This tax loss can be carried back one year, carried forward or surrendered for a 14.5% cash back.

*qualifying costs include people costs, consumables, software and capital expenditure.

How can Clear Vision Accountancy help me with my Research & Development claim?

  1. Collect initial information
  2. Assess your claim and gather more detail
  3. Carry out a technical analysis – understand more about the qualifying activity that has taken place
  4. Maximise the value of your claim and prepare a supporting report to detail the R&D work carried out
  5. Submit your report to HMRC

How do I contact Clear Vision Accountancy about my Research & Development Tax Relief Claim?

Just call our friendly team on 01249 712074, email theteam@cvag.co.uk or complete our contact form.