Do you know if your clients qualify for R&D tax relief?

Today we’ll cover how accountants can understand if their clients qualify for R&D tax relief and how we can help identify this.

Who qualifies for R&D tax relief?

In order to qualify for R&D tax relief the business must do the following of:

  • A going concern
  • Subject to corporation tax
  • The R&D must be related to current or future trade

Of course, the project must qualify however we will go through this later in the blog.

Qualifying costs

Cost that qualify are:

  • Staff costs (Includes company NICs and company pension contributions)
  • Consumable costs (Includes materials and utilities)
  • Subcontractor costs
  • Externally provided worker costs (EPWs)
  • Software costs
  • Payments to volunteers for clinical trials

R&D for tax purposes

The project must seek an advancement in science or technology by attempting to overcome scientific or technological uncertainties. But what does this mean?

Most people think of advancement as groundbreaking innovation within science and technology, which includes an overall push in the field by creating new products, processes and software. Identical to the likes of Tesla, Google and Apple.

However, accountants tend to miss out on the most important factor and that is appreciable improvement which is also considered an advancement, resulting in their client missing out on tax savings.

The reason why appreciable improvement is so important is because the majority of clients will fall into this category.

Appreciable improvement is development of a product, process of service that already exists but you make it better. For example, making a product more efficient, environmentally friendlier, lighter, cheaper, faster and stronger.

It does not include products, processes or services that require a minor or routine upgrade. Another key aspect is seeking advancement. The advancement does not have to be achieved, it can be attempted and failed with the project still qualifying.

Overcoming scientific or technological uncertainties

Once you have established your client has an advancement, you want to understand whether they faced any uncertainties. An uncertainty is knowledge on whether something is scientifically or technologically feasible or how to achieve it in practise is not readily available.

The uncertainties you must identify are the scientific or technological ones, not commercial.

Competent professional

The uncertainties faced must not be readily deducible by a competent professional. In other words, the advancement must have been undertaken from a professional within the projects field.