When most people think of Research and Development (R&D), they imagine scientists in their white coats tucked away in a lab somewhere with beakers, flasks and test tubes. Whilst some R&D is conducted in this manner, a significant proportion is simply a business trying to solve a problem using a method that has not been used before – as such it can sometimes go unnoticed and the relief unclaimed.
An example of R&D could be a business using two pieces of software which do not talk to each other and creating automatic linkages to enable that to happen. Any expenditure, such as staff costs, consumables, additional software acquired and expenses with respect to engaging subcontractors relating to that activity would qualify for R&D relief. This gives the business a valuable additional cash resource that they may not have previously been aware was available to them. This would be subject to restrictions recently introduced by HMRC to avoid abuse.
HMRC considers any scientific and technological advancement to be qualifying for R&D relief, but that sounds too technical – what does this mean?
Any activity you engage in which has never been attempted before could constitute an advancement and this doesn’t have to be completely revolutionary. You may be attempting to use a different, more environmentally-friendly, material to manufacture the same product you have always manufactured – for example replacing plastic drinking straws with paper drinking straws. And it doesn’t matter if the project doesn’t yield the desired outcome (paper straws quickly become soggy) or fails entirely – R&D relief would still be available on qualifying costs incurred in undertaking the project.
Claims for R&D relief are subject to scrutiny from HMRC but if you would like peace of mind before submitting a claim, you may approach HMRC to request for Advance Assurance. They would be able to tell you ahead of time whether they think your project would qualify for R&D. See here for more information on advance assurance.
Contact M+A Partners
Alternatively, you can call Steve Dack or Tafadzwa Kativu (TK) on:
T: 01603 227600
or arrange a meeting with us to discuss whether the project you are undertaking would qualify for R&D. We do not charge for an initial consultation so you have nothing to lose.
Should you require more information, please see M+A’s sector specific R&D leaflets.
If you forget all else, remember this – R&D doesn’t necessarily mean complicated activities, but can relate to any “outside the box” solutions to your everyday business problems.