It’s always a special moment when you receive a notification from HMRC that your client is due a tax repayment, especially when the repayment is the result of a successful Research & Development claim.
The repayment in question arose from a specialist recruitment company who had designed a new internal computer management system to incorporate all facets of their business. The corporation tax savings and tax credit repayments totalled over £50,000 and I enjoyed the phone call with the client who was suitably thrilled with the news. Like most clients, they didn’t know much about R&D and hadn’t thought they would qualify for any sort of tax relief for updating and rewriting their existing computer management systems. Thankfully our accounts and audit work programme requires our auditors and the partners in the firm to talk to the directors about any possible R&D work carried out each year so projects like this always come to my attention.
After the call I went to update our R&D database and realised that we had reached two milestones at the same time.
- Since I joined Raffingers in June 2015 we have identified qualifying R&D expenditure for clients in excess of £21million pounds
- We have also secured R&D tax savings and repayments for clients in excess of £3.5million pounds.
It seemed appropriate to use these milestones as the basis for this month’s blog, specifically in the hope that people who think their business might have qualifying R&D activities will get in touch with a R&D specialist to see if their business qualifies for any tax breaks.
It is a common misconception that R&D can only be claimed by technology or pharmaceutical companies and that the nature of the research has to be very grand or earth shattering.
In order to help you assess whether you might be carrying out R&D it is useful to consider what is generally regarded as the Six P’s for R&D:
- Product
Are you developing and / or improving a new Product?
Many companies believe they have to do something truly original in order to make a claim which often times can be nothing more than significant improvements to existing products.
- Process
Are you developing and / or improving a new Process?
An innovative method for upscaling a system or a new or improved manufacturing process can qualify for R&D relief.
- Prototype
Are you creating a Prototype? Prototypes are a key indicator that significant research and development has taken place.
- Patent
Are you filing a Patent? If so this is an indication that you might have undertaken R&D
- Professionals
If you have technical professionals such as engineers and software developers, it is likely that elements of their day to day activities constitute R&D.
- Problems
Are you encountering technological problems? If you are undertaking trials or undertaking an iterative approach when it comes to solving issues pertaining to products and processes, techniques or formulas, then this is another good indicator that R&D is taking place.
If you believe that your business might be carrying out R&D activities please feel free to give me a ring.
By Neill Staff
Tax Partner and Tax Investigation Specialist
If you need advice regarding responding to a HMRC enquiry, contact our Tax Partner at neill.staff@raffingers.co.uk or call him on 020 3146 1605.
Previous Blogs:
- Tax from the Trenches: “A First Tier Tax Tribunal and a lesson learned…”
- Tax From the Trenches: "A little bit cheeky”
- Tax From the Trenches: "Bad behaviour”
- Tax From the Trenches: “When in doubt, get an accountant”
- Tax From the Trenches: “A little holiday home…”
- Tax From the Trenches: “I haven’t slept in two years”
- Tax from the Trenches: “The best and the worst of HMRC”
- Tax from the Trenches: “How much does HMRC know?”