R&D tax claims – are you sure you’re not eligible?

Posted by Baldwins Accountants

If you think R&D tax claims only apply to ‘blue-sky’ industries, then you will be surprised to learn that there is an array of companies operating outside of the scientific and technical sectors that could benefit from the significant corporation tax savings that this tax relief can bring.

According to a HMRC report, more than 30% of all R&D claims come from businesses operating outside of what are construed as the ‘usual’ R&D-eligible sectors, with industries as diverse as retail, construction, packaging and software all taking advantage of the beneficial tax relief. In fact, the definition of Research & Development is wide and the activities that can be considered under the relief are varied, so it is difficult to spot an opportunity and determine eligibility to make an R&D claim purely based on a business’ operating sector.

Did you know that almost 10% of all R&D claims are in the retail sector.

Are you  sure your business isn’t eligible?

The criteria
Under HMRC’s definition, a company may claim R&D tax relief if an R&D project seeks to achieve an advance in overall knowledge or capability in a field of science and technology (don’t be misled by the reference here to these specific sectors) through the resolution of scientific or technological uncertainty – and not simply an advance in its own state of knowledge and capability. The project must relate to the company’s trade, either an existing one or one that it intends to start up based on the results of the R&D.

The benefits
The R&D relief can either be in the form of a reduction of the corporation tax liability, an enhanced loss to be carried forward against future profits or a tax refund. An important point to be aware of is that making a claim does not in any way negatively impact on the profit & loss account or the balance sheet

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