Despite topicality, there are still many businesses undertaking qualifying R&D activities that fail to make incentive claims to reduce corporation tax. Could this apply to your business?
What qualifies as R&D?
In technical terms, R&D for tax purposes takes place when a project seeks to achieve an advance in science or technology (not a company’s own state of knowledge or capability alone). The activities which directly contribute to achieving this advance in science or technology through the resolution of scientific or technological uncertainty are R&D.
That’s all a bit jargonistic and perhaps less help than it could be, perhaps contributing to the level of R&D claims being missed. A better question may be ‘When’ rather than ‘What’ ……
When may activities qualify for R&D?
We’ve found the best way to articulate this is in the form of examples of potential qualifying R&D activities. We have chosen Construction & Engineering and Information Technology as two specific sectors to highlight potentially qualifying activities, simply by way of illustration:
Construction and engineering
• Developing new, cheaper or more energy efficient structures and materials
• Development of fire retardant and combustive materials and structures
• New tooling and machinery processes
• Prototype development
• Redesigning to improve performance, reliability, quality, safety
• Modifying coating methods, technologies or coating products
• Offsite manufacturing or construction
• Work towards data based intelligence streams or smarter/faster data interrogation and analyses
• Developing the first version of a software product or hardware prototype or an appreciably (non-trivial) improved version of a software product
• Development of system integration methodology/architecture beyond routine solution fixing
• Developing interaction of software and/or hardware methodologies beyond knowledge deducible in the industry
• Developing new malware and security encryption techniques
• Exploitation and development of new algorithms or APIs beyond knowledge deducible in the industry
• Extension to database software, programming languages or operating systems
There are qualifying R&D activities in most other sectors too – including food technology, manufacturing, professional scientific and technical, and utilities. Indeed, we have made many successful R&D claims for clients across all of those sectors and more.
Whether that makes things any clearer or not, if you would like to discuss the availability of R&D tax incentives in the context of your own business, please get in touch with our Tax team.