R&D (Research & Development) is one of the most generous tax reliefs available to limited companies. In fact, over the past 12 months alone we’ve processed over £2m of claims on behalf of our clients. But many are still missing out, due to misconceptions around eligibility and people misunderstanding the qualifying conditions.
We wouldn’t want you to miss out too, so here’s a rundown of the most common myths surrounding R&D claims.
MYTH 1 - R&D claims are only for scientists in white coats
When people think of R&D, they instantly imagine scientists mixing chemicals in a laboratory. Yes, this is more than likely to be R&D as scientific advancement, but R&D can also refer to advancements in technology. It could be bespoke APIs, Artificial Intelligence or even custom-built apps.
The key criteria here is that it must:
Be an advancement in the field
Involve technical uncertainty
Use competent professionals
MYTH 2 - The project you’re claiming for has to be successful
When undertaking R&D, there is a risk element owing to the fact you’re trying to build something that hasn’t been done before. There’s inevitably a vast amount of uncertainty, and unfortunately, sometimes the project you hope to achieve is not feasible.
However - you could still claim the costs associated with this project through an R&D claim.
MYTH 3 - You can only claim for the current financial year
You actually have two years after the accounting period ends to make the claim. For example, for a company year end 31 March 2022, you have until 31 March 2024 to submit a claim to HMRC
MYTH 4 - You cannot claim if you’ve received other funding, such as grants
Sometimes grants or funding such as those from Innovate UK or Bounce Back Loans can affect R&D claims. But as a general rule, if the other funding or grants is not spent on R&D, then often a claim can still be made.
If you’ve spent company money and not the grants or loans on R&D, then more often than not we can apply an SME claim.
Otherwise, an RDEC claim could be carried out. This is different for each scenario, but a good accountant can help you to understand which claim is available to you.
MYTH 5 - You cannot claim for internal projects
It’s easy to overlook R&D that might have taken place in-house. Rather than conducting R&D activities for clients, you might be working on things internally that could fit an R&D claim. For example, we’ve seen clients claim while they’re developing internal platforms and systems, owing to existing ones on the market not being fit for use. This would qualify for R&D as long as it meets the qualifying criteria.
Talk to your accountant (or to us!) about R&D eligibility, challenge the above myths if you hear them, and ensure you plan your project in line with the genuine criteria. This will give you the best chance of success.