R&D Tax Credits – what qualifies? Sometimes it’s the day-to-day.
Suhail Aslam, Teesside University
Suhail Aslam of Teesside University is a specialist in R&D claims, and is speaking at a Chamber webinar on 16 June.
I have been working with R&D tax credits since 2012. My experience and background as an innovation, design and manufacturing engineer allows me to understand and ask pertinent questions relating to what companies are doing. This stands me in good stead to translate the R&D tax credit eligibility across to what a business is doing to draw out the activities that are applicable.
Since the launch of the scheme way back in 2000/01, 33.3 billion in R&D tax relief has been claimed to date.
However, many businesses are still not claiming, potentially because of not understanding the scheme and its criteria, or perhaps it’s just plain modesty? Entrepreneurs often do not think what they do qualifies as “resolution of a scientific or technological uncertainty”.
There could be other reasons, but here is a phrase I hear very frequently.
I don’t think we would qualify!
Understanding what qualifies is really the first stage of the process.
Doing your day job, you could be solving problems, developing new software or creating innovative processes, products or materials. Some of these attempts may have failed and that is a good thing because it demonstrates technological uncertainty, which forms part of the criteria.
Dead ends and glitches are the often-unwanted outcomes when striving for change and if you are working towards a “scientific and/or technical” innovation, rather than something cosmetic, your project may well qualify.
This would be strengthened by the need to overcome challenges to take an innovation forward or adding efficiencies to the process or improved functionality to a product.
There have been so many examples recently that I have been involved with. One example was a recycling company that had made significant changes to their processes to improve efficiencies, reduce energy, increase throughput and improve quality. Much of this was not considered by the company as R&D until we stepped in to write a technical appraisal that secured nearly £60k as an R&D tax refund. Another example was a manufacture of construction materials who for years had never considered the scheme until they attended a R&D event we hosted. Since then they have annually submitted returns with our help and their only regret is that they did not start earlier.
The pandemic has forced many firms to pivot towards businesses that answer a market need in, for example biologics manufacture or infection transmission and these are ideal candidates for claims.
This is also an example of why the government started the scheme – to drive innovation and entrepreneurialism – to develop and support a strong and robust economy. The pandemic examples show how business resilience and investment in science can drive economic recovery.
Why does the Government support R&D?
The government has stated that research and development will be critical to the economic and social recovery from the impacts of the pandemic.
They have already committed to increasing UK investment in R&D to 2.4% of GDP by 2027 and to increase public funding for R&D to £22 billion per year by 2024 to 2025.
You can read more about their roadmap here;
Finally, my best advice is – find an expert!
You can make a successful claim yourself and I have many examples of this. However, experience counts for a lot and as experts, we can quickly review whether what you are doing reaches the threshold for qualification.
I would always advise you get expert help as it saves time and money in the long run as it increases the likelihood of a successful application.
Director of Teesside Manufacturing Centre, Teesside University
To hear more from Suhail on R&D tax credits and how to claim them, please register for our event on 16 June.