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10 Things You Didn’t Know About R&D Tax Credits

Posted on September 27, 2021

There is a lot of mystery surrounding the Research and Development Tax Credits scheme, which has derived from a lot of misleading information circulating online. When it comes to the scheme, businesses can claim on a wide range of projects in almost EVERY sector, rewarding businesses with over 30% of their costs. We have compiled 10 things we think you need to know about the scheme.

  • Most businesses largely underclaim and are unaware they are eligible.

    97% of eligible businesses don’t make a claim due to not believing that their line of work qualifies, due to it not being entirely scientific or innovative. The R&D Scheme still seems to be shrouded in mystery, which is why many businesses don’t seem to feel confident enough to claim. Many business owners are unaware that the scheme exists and most think that their projects don’t qualify, which is largely incorrect.
  • You can claim travel expenses that have been attributed to your projects

    One aspect of the R&D Tax Credits scheme that many people do not realize, is that travel expenses can contribute to businesses’ claimable R&D expenditure. The circumstances where this is possible are when the expense constitutes an expense of the company of employing staff, or if the expense pays in order to fulfill the requirements for them to carry out their employment. It is important to note that this does not mean the expense will automatically qualify as staffing costs just because the employee has incurred that expense.  
  • You can claim for heat, light, water, and heat

    Any consumables such as electricity, gas, water, and other fuels consumed within the R&D Project can be claimed, this includes the cost of lighting, heating an office where the R&D activity was carried out, as well as running machinery used for research. It is important to note that the rent of laboratory or test facilities is not claimable. 
  • The Food & Drink Manufacturing and Architecture sectors are the biggest under-claimers. 

Sectors such as the Food & Drink and Architecture sectors are the biggest under-claimers, you could be eligible for R&D Tax Credits by carrying out activities as simple as coming up with a new and improved recipe to lower salt content or to remove an allergen. For Architecture, overcoming an environmental difficulty while carrying out your project or solving technical problems on the site can qualify.

  • There is no minimum amount that you have to claim for!

    A common misconception is that you need to have spent over a certain amount to claim R&D Tax Credits, but this is false information. There is actually no minimum amount that you have had to spend, and no matter the size of the project, a business can usually receive a reward of 26% of costs incurred in qualifying projects back. 
  • R&D Tax Credits aren’t only for SME’s!

    There are two schemes under the Research & Development Tax Credit’s scheme; SME and RDEC. The SME scheme is designed for small businesses, but the RDEC is designed to reward larger, more established businesses for their innovative efforts. Since 2002, there has been the option for larger businesses to apply, and in April 2013, the R&D Enhanced Credit (RDEC) was introduced to specifically target large businesses! 
  • Even if your business is loss-making, you can still claim through the scheme.

    Loss-making businesses can claim through the scheme, getting cashback from HMRC. An SME business can secure between 14.5% and 33% of qualifying expenditure back, and a loss-making RDEC (large company) can secure 9.7% back of its R&D expenditure. 
  • It is not restricted to Science and Tech Companies

    This misconception may be the most damaging misconception for the scheme. Many business owners believe that they need to own a laboratory and be carrying out highly skilled, experimental scientific projects to qualify, but this is very far from the truth! Yes, R&D is about innovation, but many projects that successfully claim are focused on fixing problems and improving processes, not inventing new space rockets or ground-breaking new medicines! It could be as simple as new construction techniques, engineering designs, and more. 
  • You do not have to own the intellectual property

    Previously, it was a requirement that the business claiming R&D Tax Credits needed to own the intellectual property of a project to be eligible, but this changed in 2009 making it possible for more businesses to claim. 
  •  Using a specialist will not only higher your chances of a successful claim but maximize the claim value.

    There are many reasons why you should use an R&D Tax Credits specialist, such as Green Jellyfish. Not only will this lower your chances of an inquiry or a failed claim but it will also ensure that no qualifying expenditure is missed out, as R&D Specialists know exactly what to look for, and HMRC’s criteria. In the case of your claim being enquired, the R&D specialists will also liaise with HMRC to ensure that all required information is supplied.

To find out more about how Green Jellyfish can assist you with your R&D Tax Credits claim, click here.