Craig Flynn, tax specialist at Access2Funding, explains the importance of recognising research and development (R&D) within your business.
As HMRC has recently announced changes it is making to improve the regulation and quality of research and development (R&D) tax credits claims, Access2Funding is encouraging businesses to seek the assistance of reputable professional advisers.
HMRC’s R&D tax relief schemes (for SMEs and large companies) reward businesses for investing in innovation by way of carrying out qualifying R&D activities, with the incentive being a reduction in corporation tax or a cash payment.
Craig said: “If your business is seeking to resolve scientific or technological uncertainties by creating new processes, products or services (or amending existing ones) then your company could be eligible to submit R&D tax relief claims.
“Now, more than ever, we would like to emphasise the benefits of consulting with R&D tax specialists to assist you with preparing and submitting R&D claims.
“In 2020, HMRC recruited 100 new R&D staff to its compliance unit to review many submitted R&D claims to check for R&D project and R&D costing eligibility.
“This review work includes focusing on erroneous or fraudulent claims, so engaging the services of an R&D claim specialist can protect your business from a compliance check, along with maximising your claims.”
It is important to present a balanced view in that the UK government continues to support R&D claims as a reward for businesses investing in innovation, and there are various grants available to companies as an incentive to carry out R&D.
It is therefore important that qualifying R&D activities and costs are identified on a project-by-project basis, striving to maximise claims whilst carrying out the required amount of due diligence.
What types of businesses qualify for R&D tax relief?
Businesses of any size and sector can be eligible for R&D tax credits, including computer science, construction, engineering, food and drink, manufacturing and science. If your business is seeking an advancement within your industry and has encountered scientific or technological uncertainties along the way, your business may well qualify for R&D tax credits.
Is my sector eligible for R&D?
The Research and Development Tax Credits Statistics report published by HMRC in September 2020 states that the majority of claims were in the ‘manufacturing’, ‘information and communication’ and ‘professional, scientific and technical’ sectors – but there are many other industries that would benefit from R&D tax credits.
The R&D relief scheme is underutilised and often misunderstood, with many businesses undervaluing the work that they do as just being “part of the job”. In fact, many projects have qualifying R&D elements within them, and businesses just don’t realise.
How can Access2Funding help with my R&D claim?
The Access2Funding team consists of employees and contractors who are technical industry specialists, qualified accountants, chartered tax specialists and R&D experts. We are experienced in identifying qualifying R&D activities and costs as well as writing reports technically for submission to HMRC, in a language they understand. In addition, we will advise you on how to capture relevant R&D information in real-time and how to prepare supporting evidence documentation.
To date, Access2Funding has helped return more than £44 million to SMEs across the UK. If a qualifying business engages R&D advisers that do not have technical industry experts, accountants and tax specialists, there is a risk that HMRC could believe the companies are self-certifying their claims. This can result in difficulty supporting the claim as qualifying.
Access2Funding works with HMRC to improve the policing of R&D claims, responding to consultations such as HMRC’s R&D Tax Relief Consultation, along with considering the responses published by the Chartered Institute of Taxation and Association of Taxation Technicians.
For more information on R&D relief and to see examples of qualifying R&D in your sector, visit access2funding.co.uk.
To find out if your business is eligible for R&D tax credits, take this short eligibility quiz or call 0333 990 0125.