What is Research & Development Tax Relief, and can my business make a claim?Published on
Research and Development (R&D) tax relief is awarded to businesses that invest in innovation. This innovation can be in the form of developing new systems, processes, products, materials, devices, or any changes to the way your business works.
The chances are your business is doing R&D without even realising.
R&D occurs in a great variety of different industries, despite the misconception that this type of work is only carried out in laboratories or by scientists. We have worked with companies within the food industry looking for more energy efficient ways to create jam, as well as vaping companies looking for ways to improve the density of the vape clouds – we’ve seen it all!
Unfortunately, many companies in the UK are unaware of this type of tax relief or believe that they are not eligible to claim, so this is a reasonably underclaimed benefit.
The latest statistics released from HMRC in September 2018 show that despite the abundance of innovation being carried out by businesses in the North West of England, the number of claims made in 2016-17 was only just over 2,000* (in comparison to 9,000 in London). With around 545,000** businesses listed in the North West, this means that just 0.4% are claiming R&D tax relief at the moment.
The government is also looking to increase R&D expenditure as a % of GDP over the next decade from 1.7% in 2016 to 2.4% in 2027 so there is an awful lot of focus on ensuring companies are continuing to invest in, and be given the appropriate reliefs for developing new innovations within their sector.
As an example of the type of claim that can be made, our partners Catax previously worked with an oil re-processing company based in Merseyside who carried out R&D whilst designing a method to reprocess waste oils to develop lubricant oils, something which had not previously been achieved within the UK.
The company undertook significant design, testing and analysis activity toward developing prototype analysis methodologies and re-refining processes, and spent close to £700,000 during this time. The total tax relief returned to them was £380,000.
Although many accountants claim to be able to complete your R&D tax claim for you, the complex nature of this area of tax often requires a specialist. Our partners, Catax, are an industry leading tax consultancy who specialist in this form of tax relief. They employ over 100 members of staff across the UK and can guarantee to maximise the claim that is made on your behalf.
So far, they have helped clients claim back over £230m in tax relief, which is often invested back into the business to fund further research projects, hire new staff or to improve business premises. As mentioned above, this is a relief that HMRC encourage businesses to claim as the money often goes back into the UK economy, so there really isn’t any reason not to try it!
If you’re interested in finding out whether your business could make a claim, please contact Catax’s local Business Development Manager, John Horrocks, who will be able to discuss this further with you. John is based in Liverpool and has a great understanding of businesses in the local area.
07585 777 260
*Taken from HMRC’s Research and Development Tax Credits Statistics report, September 2018
**Taken from House of Commons Library, Business Statistics report 12th December 2018
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