R&D Tax Credits

What are R&D Tax Credits and why should you claim?


The R&D Tax Credits scheme is run by the UK government to encourage spending on innovation and R&D activities. The result therefore, is that the UK becomes a global leader in innovative technologies. The benefits to your company of claiming R&D Tax Credits (if eligible) include the following:

For every £100 you spend on R&D related activity you can receive back between £26-33 back via tax credits

Greater future investment in R&D (by spending the tax credits on more R&D)

Happier staff - developers tend to prefer to develop something new than do routine work

Happier clients - they are reassured that you are an innovative, forward-thinking company

"But we don't do R&D!"

We hear this a lot - especially from soon-to-be clients! There is a lot of misunderstanding around elibility for the R&D Tax Credits scheme, so hopefully the following can help to demystify the eligibility criteria.

Firstly, let’s take out the ‘R’ from R&D. The majority of software claims fall under the category of ‘Development’. Generally speaking with regard to software, ‘Research’ for its own sake would fall under the academic discipline of Computer Science. With regard R&D claims, the majority are as a result of ‘development’ in the world of Information Technology. So, as you employ developers there is a very strong chance that they will be undertaking R& ‘D’.

The next stage is to apportion your developer(s) time to qualifying R&D projects, by asking yourself these questions:


 

Step1

Are you trying to develop a new or improved software product, or software product capability?

If yes, go to Step 2

Step2

Are you bearing the risk (financially) for the outcome of this development?

If yes, go to Step 3

Step3

Are you resolving technical uncertainty with this development work?

Note: The development would be technically uncertain if, to the best of your knowledge, you could not resolve the issues through in-depth discussion with competent professionals with technical understanding of the issues at hand or, there wasn't a readily available solution available in the public domains.

If yes, go to Step 4

Step4

Is there an attempt (whether deliberate or not) to advance overall technical knowledge or capability?

Note: An advance doesn't necessarily mean a 'new' or cutting edge product. If for example you took your existing ERP system and wrote unique code to make it faster or more efficient, then this work would most likely be eligible R&D expenditure. From HMRC's point of view, the focus would be upon the technology used to make the improvement.

If yes, you should be eligible for R&D Tax Credits

Next Steps

If you've answered 'yes' to all of the above questions, then there's a good chance that you are eligible for the R&D Tax Credits scheme. If you are are still unsure, or would like to find out a bit more about the scheme, then please do get in contact with Keith Elliott at keith@sspltd.com or call us on 01483 747812.

We look forward to hearing from you!


 

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Registered in England
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VAT No: GB 6415802

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