Research and Development – IMS StratNews

Mark Tighe, the CEO of specialist tax relief firm Catax, talks to IMS StratNews about Research and Development tax relief.

Let’s start with the basics of Research and Development.

Despite Research and Development (R&D) tax relief being introduced at the turn of the Millennium, the reality is that significant confusion remains over which businesses are eligible and what they can actually claim for: R&D tax relief is a form of government subsidy, designed to encourage greater investment and economic growth in the UK, by stimulating innovation.

And to put it simply, any business of any size and in any sector can qualify for Research and Development tax relief.

So long as a firm has developed a new product, service or business process in the past two years, they could be unknowingly missing out on these lucrative government tax breaks on work they’ve already done.

The time taken, materials used and other money spent are all potentially eligible.

Crucially, the innovation does not need to be successful for it to qualify for the relief.

When executives aren’t up to speed on Research and Development

If I had a penny for every time a CEO bet me their firm wouldn’t qualify for Research and Development tax relief, I would be at least £50 richer. This relief should not be seen as some mythical pot of gold at the end of a rainbow that only large corporations, employing a retinue of workers dressed in white coats, can reach.

The truth is SMEs are just as likely to qualify, and are even able to claim a higher rate of relief than larger companies.

Research and Development innovation is a wonderful varied bag

It’s worthwhile examining a few successful claims to demonstrate just how varied they can be.

How about developing a process to increase the speed at which doughnuts can be filled with jam?

The design and development of an improved hydraulic system which deploys counter-terror bollards more quickly?

Or, something as simple as a bespoke staff planning tool, developed by an in-house HR team.

Awareness of Research and Development tax relief is growing

The Government’s latest annual Research and Development Tax Credit Statistics show claims have risen by 52.2% year-on-year, with their value now reaching 3.5 bln stg.

However, the reality is that too many businesses are still missing out, and Catax’s own research, published earlier this year, suggests firms are missing out on 84 bln stg of this relief.

Make no mistake, this under-claiming harms our economy at a time where we can least afford it.

Innovation and creativity cannot be allowed to be stifled, and it is essential that accountants and finance professionals are aware that Research and Development tax relief exists.

Not only that, but, given, reputable consultancies don’t charge any upfront fees, there is nothing stopping a business from putting in for it.

Grasping the best of Research and Development opportunities

For SMEs in particular, the value of this relief can really turbocharge growth.

In our experience, claim values skyrocket year-on-year when firms work with specialists to identify the most cost-efficient way of conducting Research and Development.

Encouraging investment in Research and Development has never been a more prominent issue than it is now. The Government is keen to promote Britain as an innovative centre of excellence and Research and Development tax relief is a major part of the plan.

As uncertainty linked to Brexit continues, ministers hope that this regime will encourage companies of all sizes to establish roots on British soil.

The fact that the Government has pledged to increase current Research and Development investment by 50% by 2027 shows just how seriously it should be taken.

Any company not claiming what they are owed will effectively be gifting competitors — both here and across Europe — a huge commercial advantage.