Make sure you are properly prepared when claiming R&D tax credits

The UK led the world with the Industrial Revolution, making the country an international powerhouse. Now, a new green industrial revolution beckons as we struggle to save the planet from catastrophic climate change.

Research and development (R&D) was critical with that first revolution and will play a key role as we move into the new greener age and businesses should be aware of the benefits of R&D tax credits.

Research and Development (R&D) reliefs support companies that work on innovative projects in science and technology.

The latest data from HM Revenue & Customs (HMRC) shows that UK businesses spending on research and development (R&D) reached a record high of £47bn with claims for tax relief reaching £7.4bn in 2019-20.

Businesses may be able to claim Corporation Tax relief if your project meets our definition of R&D, it is a complicated field so consult with your accountant for expert advice.

Projects that count as R&D

The work that qualifies for R&D relief must be part of a specific project to make an advance in science or technology. It cannot be an advance within a social science – like economics – or a theoretical field – such as pure maths.

The project must relate to your company’s existing trade, or one that you intend to start up, based on the results of the R&D.

To get R&D relief you need to explain how a project:

• Looked for an advance in science and technology
• Had to overcome uncertainty
• Tried to overcome this uncertainty
• Could not be easily worked out by a professional in the field

Your project may research or develop a new process, product or service or improve on an existing one.

Advances in the field

Your project must aim to create an advance in the overall field, not just for your business. This means an advance cannot just be an existing technology that has been used for the first time in your sector.

Show that a professional in the field could not work this out

You should explain why a professional could not easily work out your advance by showing that other attempts to find a solution had failed.

You can also show that the people working on your project are professionals in that field and get them to explain the uncertainties involved.

Show there was uncertainty

A scientific or technological uncertainty exists when an expert on the subject cannot say if something is technologically possible or how it can be. This means that your company or experts in the field cannot already know about the advance or the way you achieved it.

Explain how you tried to overcome the uncertainty

You should show that the R&D needed research, testing and analysis to develop it.

You need to be able to explain the work you did to overcome the uncertainty.

For help and advice on R&D tax credits contact a member of our expert team today.