Knowledge Base

Food and Beverages R&D Tax Relief

There is constant pressure for innovation in the food and beverage sector to be either healthier, cheaper, vegan, dairy-free, organic or to comply with ethical or sustainable methods of production. We may chuckle to ourselves as we see another milk alternative being introduced, or get disappointed when our favourite coffee shop doesn’t have the type of milk we like, without even considering the level of research and development that goes into bringing a milk alternative into the market. In this sector, it is estimated that research and development tax claims are made for only 1% of eligible expenditure, which is phenomenal considering the extent of qualifying R&D activity in the food and beverages sector.

Only 1% of all claims are made by the food and beverage sector, despite being always pushed to innovative by consumer trends and regulation

Do you have a qualifying R&D project? Check below.

R&D worthy activity doesnt only happen in a laboratory. From new products and flavours to changes in packaging and machinery, there is constant innovation in the food and beverage sector. The fact that only 1% of claims come from the food and beverage sector, highlights that some businesses may not realise the breadth of their R&D activity.

 

A food and beverage company may be driven to innovation by consumer trends, such as gluten-free alternatives. There are also manufacturing factors that are part of R&D activity, such as having to create more products or those with a longer shelf life, or using new materials to reduce costs. Other factors that push food and beverage companies to innovate could be regulatory changes or sustainability factors, where companies may look for greener alternatives or substitutes for ingredients. With the consumer needs in the food and beverage sector always changing, there is a high likelihood your business may qualify for R&D tax credit, which can act as a welcome source of extra funds.

 

 

What is R&D tax credit?

 

The UK Government’s Research and Development Tax Relief scheme is a way to encourage and reward companies that are investing in innovation.

 

What qualifies as innovation?

 

For tax purposes, R&D takes place when you are creating something that will advance the overall knowledge or capability in the field of science and technology. In simple terms, if you are solving industry problems, creating new software, a new process or materials, you qualify. Alternatively, you can simply be changing or modifying existing products, processes or services, these activities may qualify too.

Learn More

What qualifies?

 

 

The food and beverage sector is diverse and most projects come with their own set of challenges. Improving techniques, products, quality, performance, or creating greener solutions all count toward an R&D tax credits claim.

See whether your company projects qualify for R&D tax relief

 

R&D tax relief scheme is remarkably inclusive but HMRC has specific guidelines on what companies can claim the benefit. Find out whether your project qualifies by clicking on the eligibility quiz button below.

Innovative Techniques

– Are you developing new methods of processing larger quantities of product?

– Are you improving processes to reduce microbial contamination during manufacturing?

– Are you designing a solution to increase a products shelf life?

– Are you developing new technology or automation software to make your business more efficient, such as to manage distribution centers and warehouses?

Innovative Products

– Are you developing a raw material substitution?

– Are you improving the texture, stability, flavour or nutritional value of a food product?

– Are you reforming existing products using new or different raw materials?

– Are you eliminating allergens, preservatives or artificial components?

– Are you testing new prototypes or creating trials for upcoming products?

Sustainability Innovations

– Are you developing new techniques to reduce or eliminate waste during production?- 

– Are you developing new technology or methods to be more efficient in your water, fuel and energy consumption?

– Are you developing new environmentally friendly materials for packaging or packaging alternatives?

– Are you working on a way to reduce the environmental impact of fertiliser?

Why use Novel for your R&D tax relief claims?

A simple pricing model that reflects our values to help support more R&D claims being done correctly. We do not charge you to download the report. We do not charge you on the percentage of your benefit.  Our monthly subscription fee is set to ensure that even the smallest firms are given the opportunity to submit R&D claims.

Pharmaceutical industry and R&D Tax Relief

At the heart of most projects in the pharmaceutical industry lies research and development. Yet, there is a false preconception that activities worthy of R&D tax relief are only done by drug development companies, even though there are many less obvious examples, such as suppliers of equipment, drug modification and specialist testing companies. As a sector that requires a substantial amount of investment at the beginning stages of any project, claiming pharmaceutical R&D tax relief could help alleviate some financial stress. Despite this, around 90% of eligible companies do not claim, partly thinking that they are not eligible, and the others struggling to understand how to correctly identify and attribute R&D activities for HMRC.

Only around 40% of qualifying companies pharmaceutical R&D tax relief. Are you part of the 60% not claiming?

Do you have a qualifying R&D project? Check below.

Between 2007 and 2016, the global pharmaceutical industry invested over $1.36 trillion in R&D, and forecasts predict that by 2022, global annual investment in R&D activity will be $181 billion.

 

There are a variety of activities that potentially qualify for pharmaceutical R&D tax relief, such as drug discovery, design of specialist equipment, manufacturing of drugs and their adaptations, testing, delivery, and packaging, to name a few. All throughout the life cycle of a drug, from development to commercialisation, there is the potential for a variety of companies to claim back some financial relief for the innovative contribution to the final product. Did you know that you can even claim relief on the money spent paying clinical trial volunteers?

 

 

What is R&D tax credit?

 

The UK Government’s Research and Development Tax Relief scheme is a way to encourage and reward companies that are investing in innovation.

 

What qualifies as innovation?

 

For tax purposes, R&D takes place when you are creating something that will advance the overall knowledge or capability in the field of science and technology. In simple terms, if you are solving industry problems, creating new software, a new process or materials, you qualify. Alternatively, you can simply be changing or modifying existing products, processes or services, these activities may qualify too.

Learn More

What qualifies?

 

Most pharmaceutical projects involve some aspect of innovative R&D activity from researching new compounds to making certain methods or types of drugs more accessible to different people, there is a lot of scope for innovative r&d work in the pharmaceutical business.

New software, innovative ways of storage, advances in drug delivery and clinical trials, can all count towards an r&d tax credit claim no matter whether they have been successful or not.

See whether your company projects qualify for R&D tax relief

 

R&D tax relief scheme is remarkably inclusive but HMRC has specific guidelines on what companies can claim the benefit. Find out whether your project qualifies by clicking on the eligibility quiz button below.

Eligible Activities

– R&D of raw materials for drug production, methods of analysis and development of research software and development processes..

– Manufacturing improvements, such as installing new or modernising existing facilities to ensure a certain quality of product.

– Have you developed a more sustainable way of managing your wastage?

– Are you doing innovative research to solve a problem that will advance science?

– Are you thinking outside the box by tackling sustainability issues, such as using recyclable materials, reducing waste from contamination or the amount of materials you use?

Drug Development

– Are you working on discovering new compounds that can be used for a medication?

– Are you developing new materials and compounds?

– Have you carried out phases 1,2, and 3 of clinical trials?

– Have you done test batch production and production processes for evaluation?

– Are you a specialist drug testing company that creates bespoke tests or clinical trials to analyse the effectiveness of a new drug?

– Are you a supplier of specialist medical equipment?

Innovative Techniques

– Do you create variations of existing drugs where the method of delivery is adapted, such as making medication child friendly?

– Do you adapt existing drugs for the wider market, such as vegetarian and vegan substitutes.

– Are you developing new types of packaging, such as eco friendly packaging or specialist child-resistant packaging?

– Are you adapting the size and taste of a drug?

Why use Novel for your R&D tax relief claims?

A simple pricing model that reflects our values to help support more R&D claims being done correctly. We do not charge you to download the report. We do not charge you on the percentage of your benefit.  Our monthly subscription fee is set to ensure that even the smallest firms are given the opportunity to submit R&D claims.

Biotech and R&D Tax Relief

Biotech is at the heart of the UK’s thriving and globally recognised leadership position in the life sciences. It is at the cutting edge of creating products that cure disease, feed the hungry, reduce our environmental footprint and fuel the world with cleaner energy. One of the reasons the UK has secured its leadership position is through their current research and development tax incentives system, that rewards companies investing in innovation.

While the Government is pushing money into R&D, Biotech firms need to take advantage of the benefits

Do you have a qualifying R&D project? Check below.

With a name like biotech, you would expect the companies to satisfy the research and development tax credits requirement of resolving a scientific or technological uncertainty, yet with HMRC disputing a record number of claims it is important to understand how to accurately present your R&D activities.

 

Biotech companies are continuously undertaking qualifying R&D activities that are designed to solve some of the greatest challenges facing our society. However, because the R&D in the biotech industry is unique, it requires a R&D specialist to be able to present it in a way that HMRC will understand and grant tax relief. At novel, we have R&D specialists who know how to present biotech activities to HMRC in a way that satisfies all reporting requirements whilst maximising the value of the claim.

 

With biotech research, testing and development requires a substantial amount of funding and a number of years, so it is crucial for companies to take advantage of the R&D tax relief scheme to ensure they can continue developing products, and are given the time to grow into profitable, innovative companies.

 

 

What is R&D tax credit?

 

The UK Government’s Research and Development Tax Relief scheme is a way to encourage and reward companies that are investing in innovation.

 

 

What qualifies as innovation?

 

For tax purposes, R&D takes place when you are creating something that will advance the overall knowledge or capability in the field of science and technology. In simple terms, if you are solving industry problems, creating new software, a new process or materials, you qualify. Alternatively, you can simply be changing or modifying existing products, processes or services, these activities may qualify too.

Learn More

What qualifies?

 

Most Biotech projects come with its own set of challenges. If you are creating new products, organisms, technologies and ways to solve a problem that haven’t been done before can all count toward an R&D tax credits claim.

See whether your company projects qualify for R&D tax relief

 

R&D tax relief scheme is remarkably inclusive but HMRC has specific guidelines on what companies can claim the benefit. Find out whether your project qualifies by clicking on the eligibility quiz button below.

Innovative Technologies

– Are you developing a technology that can improve the extraction of a product from its environment to be used as a biofuel, such as ethanol?

– Are you developing a technology that can extract a product or material from the environment to reduce pollution?

– Are you working on zero waste technology?

– Are you developing new medical devices, compounds or medicines?

– Are you creating algorithms and software that can analyse Biotech data?

– Are you training AI to be used for Biotech?

– Are you developing nanotechnology?

Innovative Products

– Are you developing biomining bacteria that is capable of surviving in particular environments?

– Are you developing biodegradable products to be used in medicine, food, fuel etc?

– Are you developing a new type of fungicide that protects agriculture crops?

– Are you creating a new type of fungicide that protects agricultural crops?

– Are you creating bio alternatives to traditional packaging?

– Are you creating new biomaterials to support different market sectors?

Innovative Processes

– Are you working on a way to find environmentally friendly fuel sources?

– Are you genetically modifying crops to support, improve or grow agricultural productivity?

– Are you developing or improving existing genetic modifications, tools and techniques?

– Are you working on targeted immunotherapies?

– Are you trying to improve a product by increasing its shelf life?

Why use Novel for your R&D tax relief claims?

A simple pricing model that reflects our values to help support more R&D claims being done correctly. We do not charge you to download the report. We do not charge you on the percentage of your benefit.  Our monthly subscription fee is set to ensure that even the smallest firms are given the opportunity to submit R&D claims.

Software, Information and R&D Tax Relief

Research and development in software and information technology (IT) involves new ways of solving IT related problems, improving processes and developing software. Did you know that the advances made in this sector are the key drivers of innovation and new product development across a wide range of other industries? However, the fast-paced and diverse range of claims of this sector meant that in 2018, HMRC issued new guidance in regards to claiming the R&D tax relief on software development. Unfortunately, this made it difficult for companies to successfully claim tax relief, but we keep abreast of all guidance and legislative changes to make sure the claims we do for our clients are successful.

The beauty of software and IT is that the advances made in this sector enable innovation in all other fields

Do you have a qualifying R&D project? Check below.

Software and it has been one of the most challenging areas for HMRC R&D staff to deal with, especially considering that more than 65% of all R&D tax claims are from this sector with an average value of 65,199. Therefore, although there are many opportunities to claim R&D tax relief, HMRC scrutinises this sectors claims more closely than others, and has hired their own it specialists.

 

However, this should not discourage businesses from claiming, as most are undertaking R&D-worthy work on a daily basis. Instead, its best to use R&D tax consultants who specialise in software to reduce the risk of an HMRC enquiry. We at novel have been both the advisor and the claimant when it comes to R&D tax relief, which gives us a very detailed understanding of how to make the most of the R&D claim for a software project.

 

What is R&D tax credit?

 

The UK Government’s Research and Development Tax Relief scheme is a way to encourage and reward companies that are investing in innovation.

 

What qualifies as innovation?

 

For tax purposes, R&D takes place when you are creating something that will advance the overall knowledge or capability in the field of science and technology. In simple terms, if you are solving industry problems, creating new software, a new process or materials, you qualify. Alternatively, you can simply be changing or modifying existing products, processes or services, these activities may qualify too.

Learn More

What qualifies?

 

Most software and IT projects involve some aspect of innovative r&d activity. The success of your claim relies on the objective of your project to go beyond routine analysis or adaption of existing products, software or internal management systems. The types of companies that can claim r&d tax relief vary. For example, software development agencies, in-house software developers or saas businesses can all qualify.

 

New software, innovative ways of storage, extended functionality, advances in ai, automation, robotics and more, can all count toward a R&D tax credits claim no matter whether they have been successful or not.

See whether your company projects qualify for R&D tax relief

 

R&D tax relief scheme is remarkably inclusive but HMRC has specific guidelines on what companies can claim the benefit. Find out whether your project qualifies by clicking on the eligibility quiz button below.

Innovative Software

– Have you created a software that increases the performance of other technology?
– Have you built a software that integrates third party systems?
– Have you developed new data analytics tools?
– Have you developed innovative software that captures, protects and encrypts data?
– Are you creating new wearable tech?

Innovative Activities

– Have you been working on developing a gaming engine to run new video games?
– Have you been training your staff to be able to carry out specific R&D activities?
– Have you been researching and identifying uncertainties in the sector?
– Are you undertaking feasibility studies to back up your R&D project?
– Are you training an AI data/image processing tool?

System Improvements

– Have you created technology that extends the functionality of software programs or an operating system?
– Are you significantly improving cloud software to be used commercially?
– Are you developing a CRM system that requires technological advancements?
– Are you changing or modifying an existing product, process or service?

Why use Novel for your R&D tax relief claims?

A simple pricing model that reflects our values to help support more R&D claims being done correctly. We do not charge you to download the report. We do not charge you on the percentage of your benefit.  Our monthly subscription fee is set to ensure that even the smallest firms are given the opportunity to submit R&D claims.

Insurtech and R&D Tax Relief

In any sector, you can find an insurance policy. In the past, the insurance sector struggled to qualify for research and development tax relief. However, the development of modern technology and its application in the insurance sphere gave rise to Insurtech, which now enjoys a lean digital operational model, and thus has become a strong candidate for the R&D tax credits scheme.

As Insurtech businesses are enhancing the customer experience, they are continually creating R&D worthy innovation

Do you have a qualifying R&D project? Check below.

Insurtech brought innovative offerings that have helped the insurance industry reconnect with their customers. By leveraging emerging technology, such as artificial intelligence, machine learning, and advanced analytics, Insurtech is able to drive exponential innovation in this sector.

 

Although the industry is still in its infancy, the uk is already considered the world capital for Insurtech and there is more funding available through the R&D tax relief scheme. With most Insurtech products relying on proprietary technology, there is a high likelihood that your business may qualify for R&D tax credits, helping to fund your business.

 

What is R&D tax credit?

 

The UK Government’s Research and Development Tax Relief scheme is a way to encourage and reward companies that are investing in innovation.

What qualifies as innovation?

 

For tax purposes, R&D takes place when you are creating something that will advance the overall knowledge or capability in the field of science and technology. In simple terms, if you are solving industry problems, creating new software, a new process or materials, you qualify. Alternatively, you can simply be changing or modifying existing products, processes or services, these activities may qualify too.

Learn More

What qualifies?

Insurtech brought innovative offerings that have helped the insurance industry reconnect with their customers. By leveraging emerging technology, such as artificial intelligence, machine learning, and advanced analytics, Insurtech is able to drive exponential innovation in this sector.

 

Although the industry is still in its infancy, the UK is already considered the world capital for Insurtech and there is more funding available through the r&d tax relief scheme. With most Insurtech products relying on proprietary technology, there is a high likelihood that your business may qualify for R&D tax credits, helping to fund your business.

See whether your company projects qualify for R&D tax relief

 

R&D tax relief scheme is remarkably inclusive but HMRC has specific guidelines on what companies can claim the benefit. Find out whether your project qualifies by clicking on the eligibility quiz button below.

Innovative Software

– Have you created a software that increases the performance of other technology out there?
– Have you built a software that integrates third party systems?
– Have you developed new data analytics tools?
– Have you created software that incorporates blockchain, in a new way?
– Have you developed new encryption and protection software for our platform that wasnt available before?

Innovative Products

– Have you created an app that provides robo-advice through a digital customer interface?
– Do you have a product that sells insurance in an innovative way that has not been done before?
– Are you creating a product that is fully automated that has not been available before?

System Improvements

– Have you developed a new machine-learning technique to process data or to personalise products?
– Have you made innovative advances in AI That add to the insurtech sector as a whole?
– Have you created technology that improves and personalises customer service?
– Have you developed advanced analytics that will enhance the availability of insurance?

Why use Novel for your R&D tax relief claims?

A simple pricing model that reflects our values to help support more R&D claims being done correctly. We do not charge you to download the report. We do not charge you on the percentage of your benefit.  Our monthly subscription fee is set to ensure that even the smallest firms are given the opportunity to submit R&D claims.

Fintech and R&D Tax Relief

The past few years has seen the financial services sector exploding on the scene with incredible technological innovations. The scope and speed of the evolution in this sector has been astonishing and has given rise to what is now known as Fintech. Yet, despite Fintechs disruptive and innovative nature in the financial services sector, it does not even make the top 5 of the sectors that are claiming r&d tax relief. Why?

Fintech includes financial education, retail banking, investment platforms, payment systems and cryptocurrencies

Do you have a qualifying R&D project? Check below.

When it comes to Fintech, R&D worthy activity is often undertaken on a daily basis. A sector that prides itself on security and data protection requires heavy investment in infrastructure to support it, such as transaction encryption, regulatory compliance software, authentication software, fraud detection software and the likes.

 

There is qualifying R&D activity often taking place in the Fintech industry. For example, how you comply with financial regulations, whether you are creating competing software, or creating technology that protects the assets of your customers, may all be subject to R&D tax credit.

 

What is R&D tax credit?

 

The UK Government’s Research and Development Tax Relief scheme is a way to encourage and reward companies that are investing in innovation.

What qualifies as innovation?

 

For tax purposes, R&D takes place when you are creating something that will advance the overall knowledge or capability in the field of science and technology. In simple terms, if you are solving industry problems, creating new software, a new process or materials, you qualify. Alternatively, you can simply be changing or modifying existing products, processes or services, these activities may qualify too.

Learn More

What qualifies?

Most Fintech projects involve some aspect of innovative research and development activity, the costs of which will likely be eligible for R&D tax credits. Although in many other sectors it is possible to show a tangible product as the output of your R&D activity, most fintech claims require a different approach when it comes to filing for research and development tax credit.

New software, innovative ways of storage, advances in ai and calculation engines, innovative CRM and more, can all count towards a R&D tax credit claim, whether they have been successful or not.

See whether your company projects qualify for R&D tax relief

 

R&D tax relief scheme is remarkably inclusive but HMRC has specific guidelines on what companies can claim the benefit. Find out whether your project qualifies by clicking on the eligibility quiz button below.

Innovative Software

– Have you created a software that increases the performance of other technology out there?
– Have you built a software that integrates third party systems?
– Have you developed new data analytics tools?
– Have you developed software that promotes cybersecurity measures?
– Have you developed software for a new digital wallet, payment processor or online trading platform?

Innovative Products

– Have you created a new banking system?
– Have you created a new digital currency?
– Have you created a new app in the financial sector, such as a budgeting app?
– Have you developed a product that can read digital banking data?
– Have you developed a new money management tool?

System Improvements

– Have you developed technology that enhances security?
– Have you developed new ways to encrypt data?
– Have you developed trading algorithms?
– Have you built an ai algorithm that automates certain tasks?
– Are you working on any proprietary technology that will improve functionality in the financial sector?

Why use Novel for your R&D tax relief claims?

A simple pricing model that reflects our values to help support more R&D claims being done correctly. We do not charge you to download the report. We do not charge you on the percentage of your benefit.  Our monthly subscription fee is set to ensure that even the smallest firms are given the opportunity to submit R&D claims.

Manufacturing and R&D Tax Relief

Innovation in the manufacturing sector allows companies to address the changing consumer needs and industry standards. If your company recently introduced new or improved products, or enhanced manufacturing processes, you may benefit from research and development tax relief. Manufacturers are leading the way when it comes to leveraging tax relief. The recently published statistics by HMRC reveal that manufacturers are one of the main sectors claiming R&D tax relief. Despite this, the average claim value is one of the lowest of all sectors, highlighting a possible issue with some companies under claiming.

25% of all claims are made by manufacturing firms, yet the average claim value is one of the lowest of all sectors

Do you have a qualifying R&D project? Check below.

No two manufacturing industries are exactly alike; some are more physically labour intensive, others more knowledge-intensive. To some, proximity to customers is essential, whereas others rely heavily on transport. One possible reason for manufacturers under claiming could be this misunderstanding of the different types of projects that qualify. From the initial designs to the final project, manufacturers may be facing challenges at every stage of the manufacturing process, all of which can qualify for r&d tax credits.

 

Adapting to change in legislations, new chemicals, health and safety concerns, and different techniques, you may have been undertaking valuable, qualifying r&d work without realising it! As the manufacturing market gets tougher and pressure from new entrants grows, its important for companies to utilise the valuable r&d tax credit scheme. It can help boost businesses and also acts as a reward for the innovation that is done.

 

What is R&D tax credit?

 

The UK Government’s Research and Development Tax Relief scheme is a way to encourage and reward companies that are investing in innovation.

What qualifies as innovation?

 

For tax purposes, R&D takes place when you are creating something that will advance the overall knowledge or capability in the field of science and technology. In simple terms, if you are solving industry problems, creating new software, a new process or materials, you qualify. Alternatively, you can simply be changing or modifying existing products, processes or services, these activities may qualify too.

Learn More

What qualifies?

 

The manufacturing sector is diverse and most manufacturing projects come with their own set of challenges. Improving functionality, reliability, quality, performance, materials or greener solutions all count toward an R&D tax credits claim.

 

See whether your company projects qualify for R&D tax relief

 

R&D tax relief scheme is remarkably inclusive but HMRC has specific guidelines on what companies can claim the benefit. Find out whether your project qualifies by clicking on the eligibility quiz button below.

Innovative Techniques

– Are you developing innovative ways of re-using materials?

– Are you working on prototyping and three-dimensional modelling?

– Are you working on a more cost effective operational model?

– Are you working on an operation model that is driven by sustainability?

– Are you creating robots that can work alongside humans during production?

– Have you created techniques that improve the workflow and production processes of a company?

Innovative Materials

– Are you creating new or alternative materials to replace or improve existing materials?

– Are you creating new materials to meet new regulatory requirements?

– Are you working on eco solutions, such as alternatives to traditional plastic packaging?

– Are you designing and testing new prototypes?

System Improvements

– Are you using automation to improve manufacturing processes?
– Are you working on ways to integrate new technology with old systems to improve manufacturing processes?
– Are you developing virtual or mixed reality software?
– Do you use digital modelling to help design factory layouts or to maximise space efficiency?
– Have you created innovative software that tackles manufacturers problems, such as inventory management?

Why use Novel for your R&D tax relief claims?

A simple pricing model that reflects our values to help support more R&D claims being done correctly. We do not charge you to download the report. We do not charge you on the percentage of your benefit.  Our monthly subscription fee is set to ensure that even the smallest firms are given the opportunity to submit R&D claims.

Construction and R&D Tax Relief

A sector built on innovation that only claims 3% of the total research and development tax relief across all companies, despite employing 10% of all jobs in the uk. The construction industry is currently struggling with rising material and labor costs, increased competition and shrinking profit margins as well as stagnant productivity levels. With R&D tax relief, your business will have extra capital to attract better talent, inspire employees, take on greater projects that may involve more risk and experiment with new technological solutions. The more your business spends on qualifying R&D, the more you can claim back.

Construction sector often misses out on R&D tax relief, despite striving for innovation

Do you have a qualifying R&D project? Check below.

People in the construction sector often don’t realise that they are doing work that fits the Government’s definition of research and development. Instead, they simply call it “problem solving”.

 

However, if we considered all the aspects that fall under construction, from engineering to materials to overcoming planning and conservation issues, we begin to realise the extent of R&D work that actually happens. This coupled with the fact that typically ROI for construction project occur long after the project has begun means that R&D tax credit can be a very valuable source of funding throughout the project’s lifecycle.

 

Despite this, the construction sector claims 11% less than the average SME, despite their high operating costs. There are many reasons for that, but a big one is the belief that they do not partake in any R&D qualifying activity.

 

What is R&D tax credit?

 

The UK Government’s Research and Development Tax Relief scheme is a way to encourage and reward companies that are investing in innovation.

 

What qualifies as innovation?

 

For tax purposes, R&D takes place when you are creating something that will advance the overall knowledge or capability in the field of science and technology. In simple terms, if you are solving industry problems, creating new software, a new process or materials, you qualify. Alternatively, you can simply be changing or modifying existing products, processes or services, these activities may qualify too.

 

Learn More

What qualifies?

In construction, each projects comes with its own set of challenges and how you deal with them may potentially save you money, instead of costing you money. New materials, processes, technologies and approaches can count toward an R&D tax credits claim.


See whether your company projects qualify for R&D tax relief

 

R&D tax relief scheme is remarkably inclusive but HMRC has specific guidelines on what companies can claim the benefit. Find out whether your project qualifies by clicking on the eligibility quiz button below.

Innovative Techniques

– Are you building with acoustics in mind?

– Do you have a unique energy saving method?

– Have you done a bespoke design with unpredictable obstacles?

– Do you create or improve software to aid the construction process?

– Are you developing new ‘green’ solutions in your business, such as low-carbon technologies and energy efficient installation?

– Are you developing techniques that help protect building from natural disasters that haven’t been done before?

Innovative Materials

– Are you working on a new prototype for a material? 

– Are you developing new materials?

– Are you using an innovative way and repurposing old materials to solve a problem?

– Did you create site-specific material to fit within the new environment?

– Have you developed or improved technology within the construction sphere?

Overcoming Site Issues

– Was there contamination on site that you dealt with, strategically? 

– Did you develop new equipment to help you carry out your construction project?

– Have you created innovative ways to keep your workers safe, such as new protective gear, automation etc?

– Are you developing new ways for water management not done before?

Why use Novel for your R&D tax relief claims?

A simple pricing model that reflects our values to help support more R&D claims being done correctly. We do not charge you to download the report. We do not charge you on the percentage of your benefit.  Our monthly subscription fee is set to ensure that even the smallest firms are given the opportunity to submit R&D claims.

Novel, R&D tax relief, RDCF

Discussing the proposed updates by HMRC to R&D Tax Relief

The UK government announced updates to a number of tax policy measures on November 30th as part of the “Tax Administration and Maintenance Day”, in an attempt to modernise the UK’s tax system and combat non-compliance. 

The substantive policy changes included:

  • The inclusion of data and cloud computing costs as an eligible qualifying expenditure category
  • The clampdown on overseas R&D activities, with emphasis instead placed on incentivising domestic R&D activities
  • The improvement of compliance within the industry as a whole

In addition to the above, HMRC also made reference to some further policy updates at the Research & Development Communication Forum (RDCF) which was held in early December. After attending the forum and reading through the above policy changes in detail, we have summarised our initial thoughts below.

Data and cloud computing costs

Buying datasets

We have spoken at length in another post about the proposed changes to the data and cloud computing costs and what it will mean for businesses so we will only briefly summarise them. If you want to learn more, read our blog post about it here.

Following the changes, businesses will be able to claim R&D tax relief on expenditure that is linked to buying datasets that are directly used for qualifying R&D. However, companies will not be able to claim relief on costs on datasets where the information will be resold or have lasting value to the business beyond the duration of the R&D project. Whilst this definition is made in a similar manner to consumable costs, how this is interpreted in practice is yet to be seen. Data is often consumed during the training of an algorithm and, assuming the project is successful, will have a lasting value within the business if that algorithm is then used commercially.

Staff costs in relation to datasets

Businesses will be able to claim relief on staff-related expenditure for the purpose of collecting, cleansing and analysing data. Although you were already able to claim relief on staff expenditure that is directly tied to the R&D project, the government wants to make their position on this clear in relation to the guidance. 

Cloud computing and software

Raw data is often required to be further analysed and modified in order for it to be available for interpretation. The government will now allow businesses to claim relief on the cost of cloud computing services and software used directly for R&D if they are used for computation, data processing and analytics. 

Caution needs to be taken though that some software performs more than one function, such as analytics and storage. The scheme specifies that storage does not qualify for relief. The reason that costs relating to servers and data storage are not included is because they are seen as overhead costs, akin to rental costs, which are not considered a qualifying expense for R&D tax relief.

In practice this means that if you use software that incorporates multiple functions such as AWS DynamoDb, which can act both as a storage and analytics tool, the costs need to be apportioned as the business will only be able to claim for the analytics costs. However, for other software, such as AWS Lambda, which is fully used for data processing and analytics, the business will be able to claim the full amount.

Overall, compared to other proposed changes, it appeared that this area had the least debate and questions surrounding it. Most questions focused on two things. Firstly, the practicality of being able to apportion costs of software programmes. Secondly, whether it is reasonable to expect data not to be reused for other purposes and projects. At the RDCF HMRC confirmed that the details are still being finalised which unfortunately didn’t shed any further light on this subject for now.

Overseas R&D relief

This proposed change was one of the two that raised the most follow up questions and concerns. Currently, under the SME R&D tax relief scheme and RDEC, businesses are able to claim relief on R&D activity that is conducted overseas. 

However, in an effort to refocus R&D investment and innovation domestically, the government is proposing to limit the relief to R&D activity that has only been undertaken in the UK. This relates to all qualified expenses, such as staff costs, subcontractor costs and EPWs, the only exceptions to costs outsourced overseas were for data, cloud, software, clinical trial volunteers and consumable costs. In addition, if you hire a subcontractor and they rely on overseas staff, relief will only be available on expenditure that has been performed within the UK.

This presents a number of challenges that can be broken down into three questions: 

  • What if R&D must take place overseas, for example, due to regulatory issues in the UK?
  • How does a company ensure an unconnected subcontractor or staff provider doesn’t engage with overseas workers in delivering their service?
  • What does this mean for companies that have international subsidiaries?

From the discussions at the RDCF, it appears that HMRC have a rather rigid opinion that most expertise required for R&D work in the UK can also be found in the UK. Whilst this could be true for certain industries such as software development, this isn’t clear cut for others. At the RDCF, an attendee raised the point that sometimes overseas R&D expenditure is required, for example studying climate change that requires staff to be posted abroad near glaciers, or relying on clinical trials to be conducted abroad, much like the case with AstraZeneca and developing the COVID vaccine, where the trials took place in Brazil and South Africa which allowed them to gather more data

Moreover, in both these cases time and urgency appears to be a factor, which makes one wonder whether taking R&D abroad to expedite the project would qualify for relief. HMRC representatives appeared to respond favourably to these examples although no definitive answer was provided. 

During the forum, we tried to ascertain how HMRC suggests companies ensure that the work is carried out by subcontractors whose staff is based within the UK was left unanswered. It will be interesting to see how this works in practice, as it seems unlikely that businesses will be privy to this sort of information from their subcontractors, unless they are connected parties.

Likewise, HMRC confirmed that if the policy changes are implemented as currently planned, this restriction will also impact connected parties or companies that have overseas subsidiaries. Considering that the reason for this change is to ensure that the R&D relief is reinvested back into the UK, not allowing connected companies or companies part of international groups that are owned by a UK tax paying entity to claim relief on overseas expenses may seem counterintuitive to stimulating R&D taking place in the first instance.

Overall, it is still unclear whether this will go into effect and there is scope for this to change as the government is interested in hearing stakeholders’ views and suggestions. If the stakeholders are able to justify overseas expenditure without detracting from the focus on encouraging UK innovation and promoting UK industries, this point may be reconsidered. 

Improving compliance 

There have been some concerns over abuse in relation to the R&D tax relief claims over the past years. Some of the proposed changes to mitigate these issues is to require more information and make all claims digital. 

In terms of adding more detail about each R&D project it is hard to tell what effect it will have on the claim process. In practice, it is very difficult to prescribe a set format for the ‘Technical Narrative’ which outlines qualifying work, given R&D could be undertaken in vastly different industries. As of now, the legislation does not require the submission of supporting documentation for an R&D claim. In essence, this means that a claim can be submitted without providing a ‘Technical Narrative’ and instead, the one number is included on the company’s Corporation Tax Return. The government may look to change this in the future and legislate for supporting documentation, though how this is achieved in practice is somewhat speculative at the moment. 

Likewise, when asked to clarify what HMRC meant by digital, they said ‘submitted by COTAX or IXBRL’, which could mean that HMRC is aiming to standardise how it is receiving all the information about R&D tax relief and will stop receiving claims through post or email. In the past, HMRC’s willingness to accept CT600 amendments by email has led to delays. It, therefore, seems that the move towards digitalisation will help ensure claims are processed in a timely manner.

In addition to the above-proposed changes, the claims will need to be endorsed by a named senior officer of the business and include the details of any agent who advised in compiling the claim. Ultimately the company is responsible for any R&D claim made by the business, though as it stands no one individual needs to put their weight or credentials against the claim. Again, this is already captured already through the inclusion of ‘Competent Professionals’ on the narratives, though in practice this can sometimes be hard to implement, given that one individual may leave the business.

Similarly, in cases where companies may use a third party R&D consultant to do their claim but their accountants input the R&D figures to a CT return, who would be held responsible? What would accountability actually mean in the eyes of HMRC and where would the line be drawn in terms of responsibility, liability or penalties? 

Probably the most divisive change that HMRC proposed was the requirement for companies to notify them in advance if they are planning to make an R&D tax relief claim as it appears to contradict the concept of an uncertainty, hinder startups and is overall incompatible with a company’s statutory right to amend their return. To properly unpack all these concepts, we decided to dedicate a separate blog post to it, which you can read here.

What are the next steps?

The government is encouraging stakeholders to share their views on the proposed changes. They will then publish a draft legislation in the summer of 2022. The draft legislation will then be subject to further debate, before the final changes are included in the 2022-23 Finance Bill. Any eventual changes to the R&D Tax Relief scheme will therefore take effect from April 2023.

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Why you should not leave your research and development tax relief claim to the last minute

last minute R&D tax relief, tax relief, randd tax relief software

To understand why you shouldn’t leave your R&D tax relief claim to the last minute, let’s consider the following example. Robert is a busy entrepreneur who is responsible for his business’ financial success. Robert has heard about research and development tax relief previously but never had the time to fully investigate the possibility of claiming. Although he did know that claiming can help by providing additional cash flow it was never on his priority list to pursue a claim. So what are some things that happen when you delay your claim?

By delaying your claim, you are also delaying your benefit.

The first and most simple point, you are delaying your benefit.

How to submit an R&D claim?

All limited companies have the statutory right to amend their corporation tax returns retrospectively up to two years past the relevant accounting period year end date. This date is the statutory deadline for submitting a research and development claim. The R&D claim is submitted via the corporation tax return form (CT600) by filling out the relevant boxes and attaching the technical narrative PDF as proof of the R&D work carried out.

What are the requirements for submitting a claim?

Before the research and development claim can be submitted, the CT600 has to be prepared. Before the CT600 can be completed the company needs to finalise its statutory accounts as the numbers from the accounts plug in to the CT600.

Delayed preparation and or completion of company accounts and CT600 form are one of the top causes of delay during the R&D claiming process, followed by people answering the necessary questions for the technical narrative of the R&D projects. Ideally, try to avoid having to rush making your R&D tax relief claim as, firstly, it’s stressful, secondly, it doesn’t allow enough time for a thorough R&D cost and narrative evaluation. This could lead to mistakes or certain R&D projects falling through the cracks.

The narrative provides proof of the type and level of research and development activity within the business. Although gathering information and turning this into a good technical narrative takes time and should also be accounted for in the context of submitting a timely R&D claim, if you are recording your R&D as you go along in Novel, this significantly speeds up the process.

Best time to submit a claim

In short, you can submit as soon as all the above required pieces are finalised. It is worth mentioning, that there are certain times throughout the year that are extremely busy for HMRC. Where possible to submit earlier do try to avoid submitting claims in December and March.

The reason for this is because these dates coincide with the calendar year end and the UK’s tax year end, as a result, HMRC tends to be very busy and it may take longer for them to process your R&D tax relief claim, thus delaying your benefit.

Real time tracking of R&D

There are numerous good reasons for tracking the R&D work in real time but one of the most important ones is that it facilitates an expedient delivery of the technical narrative. By keeping track and noting down R&D activity on the go, you are recording more accurate information and are able to go into more detail as it is fresh in your memory. When it comes to writing up the technical narrative at the end of the year, all that is required is editing what is already there without worrying whether any qualifying work has been left out.

Do your next R&D tax relief claim with Novel

Overall, we highly recommend making a timely submission as this can greatly impact your cash flow and support all aspects of your business. You can generate HMRC-compliant R&D tax relief claims without the complexity quickly and efficiently as well as take advantage of a suite of features: education content, financial aggregators and record ongoing R&D all within Novel.

Preparing R&D tax relief claims hasn’t been easier. 

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