R&D - Can you claim?

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First introduced by HMRC in 2000, R&D relief has become a valuable claim for many companies, but companies are still unaware of the opportunities to claim this generous tax relief.

It’s a common misconception that R&D tax credits are only associated with hi-tech industries or heavily scientific projects, however this simply isn’t the case.

What qualifies for R&D relief?

BHP regularly carry out R&D meetings and from experience, some businesses still have preconceptions that they won’t qualify for R&D for a variety of reasons ranging from “it’s just what they do” to believing it’s such a small investment that it’s not worth investigating a claim. Others are put off because they believe it’s only projects involving white coats in laboratories that qualify.

This couldn’t be further from the truth. Here at BHP, we’ve carried out R&D claims for a variety of companies in various sectors including recycling, coffee bean roasters, software developers, construction and the automotive sector to name but a few.

This lack of understanding often means companies miss opportunities to claim this generous tax relief.

As well as innovation on new products, claims can be made for modifying existing products, processes or systems. Whatever sector a company operates in, if a challenge has arisen when trying to resolve technological or scientific uncertainties, there is a high possibility of making an R&D claim.

A project doesn’t even need to be successful! HMRC recognise that failures often arise in the world of R&D. The R&D tax relief is therefore still available for failed projects and any time spent on the process will still be eligible for the relief.

Why are R&D tax credits available?

HMRC’s ultimate goal by providing enhanced relief for R&D expenditure is to encourage greater spending where projects may be risky. They hope the relief leads to greater investment in innovation throughout the UK.

The relief signals the government’s commitment to supporting UK businesses to innovate and succeed.

According to HMRC’s September 2018 report, 39,960 R&D tax credit claims were made for 2016-17 – worth £3.5bn.

How do R&D tax credits work?

For SMEs, R&D tax credits work by enhancing qualifying expenditure for tax purposes by an extra 130%. The enhanced expenditure can then either reduce a company's tax bill, or in a loss making position, can be cashed in to HMRC for a 14.5% repayable tax credit.

Qualifying expenditure covers the cost of staff working on R&D projects, expenses relating to consumable materials and equipment as well as costs for subcontractors that have assisted with the project.

If assets are acquired for use in R&D, a 100% allowance on the expenditure can be where annual investment allowance has already been exhausted.

Find out more

As experts in R&D tax credit claims, BHP take pride in taking the time to ‘step back’ and help our clients recognise all the R&D they are undertaking, often without even realising. As noted, since April 2018, BHP have been successful in saving our clients over £9.4 million in R&D tax credits.

Don’t miss out! Get in touch today on to find out how we can help.

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