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How do I Know if I Qualify for R&D Tax Credits?

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This article was submitted by Lime R&D Wales’ only chartered tax adviser consultancy specialising in R&D tax credits

The official definition provided by HMRC states:

“R&D takes place when a project seeks to achieve an advance in science or technology through the resolution of scientific or technological uncertainty”.

Most people scratch their head when they read this – so what does it mean in practice?

It is easier to understand if we split the definition into its 3 component parts (and rearrange the order slightly):

  •  You need a project
  •  The project needs to contain scientific or technological uncertainties
  • The project needs to seek an advance in science or technology

We shall look at each in turn below.

A project

A project could be from any one of the following:

New

Create a new product,
process, service, software
or device.

Improve

Make improvements to an existing product, process, service, software or device.

Duplicate

Copy a rivals product, process, service, software or device.

I would expect nearly every company could put a tick next to at least one of the above – after all companies constantly try to improve their products and processes to stay ahead of the competition.

Scientific or technological uncertainties

Unfortunately, it is not sufficient to simply have one of the above projects.  The project also needs to contain one or more scientific or technological uncertainties to qualify.  What are these?

To understand, we need to define the concept of a competent professional and understand what HMRC look at when assessing a claim.

A competent professional is what it says on the tin.  This is a professional from within your industry with the skills, experience and qualifications to be regarded as competent.  Note we are not saying they are experts, they are just competent.

In terms of what HMRC look at, they are primarily concerned with the journey of R&D rather than the outcome.  Indeed a project could be a disaster (and therefore there is no output) and still qualify.

If you think of an R&D project as a journey from point A (start of a project) to point B (the end), what HMRC want to see is that there were challenges along the road that were not readily deducible by a competent professional nor easily overcome using publically available information.

If your project had one or more of these fundamental challenges, which took more time and effort to overcome, then congratulations – it is likely you could make an R&D tax credit claim.

Seek an advance in science or technology

What is science or technology?  Basically it is knowledge.  By overcoming the above scientific or technological uncertainties, you would have needed to advance this knowledge.

By definition, a technical uncertainty exists when there is no publically available information which could be used to address the challenge.  Therefore, by solving the challenge you have advanced the state of knowledge within your industry.

A caveat is needed here.  It is not sufficient to only advance knowledge within your own company.

To understand this, it is easier to describe a scenario to you.

Imagine I put you in a room with 100 other competent professionals from your industry and got you to explain what you did.  Would they appreciate your work, or would they say that anyone of them could have done what you have achieved, as the knowledge was publically available?

Therefore just because the knowledge isn’t within your company, overcoming a challenge doesn’t imply an advance in science or technology if the knowledge was already available in your industry.

Summary

You may be thinking this is quite general – indeed it needs to be.  The legislation needs to cover a manufacturing company, a food producer, an engineering firm, a pharmaceutical company, a software engineer etc.  The list is endless.

The basic principle is that you need a project which involved challenges that were not easy for a competent professional within your industry to overcome.  If this is the case, you could be eligible to make an R&D tax credit claim – it is as simple as that!

Lime R&D is a firm of chartered R&D tax advisors who specialise solely in helping companies make successful R&D claims and ensuring that their claims are fully optimised, so you get the full amount of relief you are due.  We do this completely risk free – if HMRC do not accept your claim, then there is nothing to pay!  We also provide a free no obligation initial consultation, and do not tie you into any long-term contracts – so you really do have nothing to lose.  If you think there is a chance your company could benefit from the relief why not request a call back from one of our chartered R&D tax specialists who would be happy to discuss your business and whether you could make a successful claim.

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Lime R&D is not your average tax consultancy. As the only firm of Chartered Tax Advisers dedicated to R&D tax credits in Wales, we pride ourselves on our refreshingly unique approach to Research and Development (R&D) tax credits which makes the claim process simple and straightforward.

We specialise exclusively in R&D tax credits – this level of specialism provides us with a more thorough understanding of the tax legislation, HMRC practice and how it could impact your business. Based in South Wales, we are passionate about helping Welsh companies from all sectors successfully claim what they are entitled to, which often equates to tens of thousands of pounds or more.

We appreciate that the claim process can be a little overwhelming. There is so much information available that it is hard to know where to begin. Our Chartered Tax Advisers provide a complete R&D service ensuring your claim is fully optimised, providing you with peace of mind and confidence, whatever your industry, size or structure.

More companies qualify for the relief than you may first think. You do not need to be undertaking cutting edge research to make a claim – this is the biggest misconception surrounding R&D tax credits. You simply need to demonstrate that your company has undertaken work which was not routine or easy to achieve. Our experienced advisers can help pull all the necessary information together and present it in the correct way.

All this can be done risk free – if you do not receive a benefit then Lime R&D won’t charge you anything! Contact us to speak to one of our specialist Chartered Tax Advisors.

 

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