We're here to help

Can You Claim Tax Credits For Failed R&D Projects?

Posted on August 2, 2021

There is a common misconception that R&D tax credits are only available to research and development projects that are successful. This is not completely (if not,- a bit) correct as it all stems from the reasons as to why the R&D activities failed. For example, if the project has failed for business, commercial or legal reasons then yes, there will be a problem. However, if the project failed for technical reasons, then within the legal guidelines of the Tax Credit incentive, this can turn out to be a positive moment for the business. It’s because this shows that what you were actively trying to achieve was legitimately a challenge for the staff force of all ages and experience. Therefore, if the projects fail, you don’t necessarily have to scrap the whole research data collected. This could be worth a substantial amount of R&D tax credits for your business. 

What is the value in unsuccessful projects to be rewarded Tax Credits? 

As daunting and demoralising as it is to admit to a project failure, there is still a good amount of value to be taken from the failed projects. This is because failed R&D activities provide a substantial amount of information that can be used for future projects to work on. You look at any revolutionary R&D projects, the chances are that they had plenty of setbacks along the way. Therefore, even if your projects fail, there are still positives to be taken from them especially with the tax relief helping SMEs stay afloat after taking a hit with the failed projects. 

 When undergoing R&D, there is always a certain degree of risk that is associated with said project. The extent of it can often be too big of a challenge to overcome. That’s why R&D incentivises behaviours and processes involved, not results. Therefore, by reducing the risks of innovation through subsidisation notwithstanding the end result, then more businesses and industries are actively encouraged to take the risks and undergo R&D.

It’s always key to remember that even if your projects qualify under the R&D criteria, your business can only claim R&D tax credits if it falls under a UK limited company category that pays corporation tax. 

To find out more click here.