R&D Tax Credits What you need to qualify
To qualify for R&D tax relief, your company must be undertaking wok to resolve a problem or challenge you have identified. Sometimes this is obvious but other times it’s not so clear.
Some of your costs can be claimed to get money back for your company.
Projects can take a long time to complete. From early feasibility and market research through to actual development, and sometimes user testing. Although all stages of the project are important, from an R&D tax point of view, it’s only the time when you are resolving any scientific or technological uncertainty that qualifies.
Qualifying R&D activity starts the minute your business identifies an uncertainty and ends when either it has been resolved or you realise you’re unable to and end up abandoning the project. That’s good to know, as even if the project fails, you can still claim for the money you spent.
Scientific or Technological Advancement
Most people do not fully appreciate the wide scope of what is classed as a scientific or technological advancement. One common misconception leads people to think of researchers in white coats working in labs or being the first to develop something. For R&D purposes, an advancement in science or technology is:
– Improving scientific or technological knowledge or capability.
– The development of a new process, material, device, product or service.
– The appreciable improvement of an existing process, material, device, product or service.
– The duplication of an existing process, material, device, product or service in a new or appreciably improved way.
HMRC’s guidance explains that overall knowledge refers to what is ‘publicly available’. So even if someone has already done what you are setting out to achieve, if that know-how isn’t in the public domain, and you’re having to do your own R&D, then its an activity that would still qualify.
Scientific or Technological Uncertainty
It’s important to identify uncertainty within a project as it determines the amount of time you are eligible to claim for. Uncertainty exists when there is doubt about the possibility, feasibility or achievability of a project which cannot be readily deducible by a competent professional. There is uncertainty an outcome cannot be reached by:
– Referring to publicly available knowledge.
– Implementing known techniques, process, materials etc.
– Making minor modifications, improvements or fine tuning.
Another type of uncertainty, often found in software and food projects, is where the whole process is complex rather than any individual part. So while you might understand each separate component, you could be unsure of how they will interact, or if one component will have a negative impact on another. This is called ‘system uncertainty’.
A competent professional are the people within the business who have both the knowledge and are up to speed on the industry standards and processes. They usually have lots of experience either through their training and accreditation or practical experience. They are the ones who are best placed to detect a project that might qualify. It’s our job to explain what qualifies for R&D Tax relief to help them do this.
These people are key to the claiming process and pin pointing them early on really helps.
Salaries, employers’ national insurance and pension contributions, bonuses, commissions and reimbursed expenses.
Externally Provided Workers
Third party workers hired for a task through an intermediary, which you have ‘supervision, direction and control’ over.
Generally, for people or companies that you have contracted to help with certain aspects of your project.
Any computer software or software licences that are specifically purchased and/ or used for an R&D project.
Raw materials or ingredients used when developing a product. Essentially, anything ‘used and transformed’ during an R&D project.
Funding for independent research and development for a qualifying body.