If you think R&D claims only apply to ‘blue-sky’ industries, then you will be surprised to learn that there is an array of businesses operating outside of the scientific and technical sectors already benefitting from the significant corporation tax savings that the scheme can bring.
According to a HMRC report, more than 30% of all R&D claims come from businesses operating outside of what are construed as the ‘usual’ R&D-eligible sectors, with industries as diverse as retail, construction, packaging and software all taking advantage of the scheme. In fact, the definition of Research & Development is so wide and the activities that can be considered under the scheme so varied, it is very difficult to spot an opportunity and determine eligibility to make an R&D claim purely based on a business’ operating sector.
Did you know that almost 10% of all R&D claims are in the retail sector. Are you sure your business isn’t eligible?
Under HMRC’s definition, a company may claim R&D tax relief if an R&D project seeks to achieve an advance in overall knowledge or capability in a field of science and technology (don’t be misled by the reference here to these specific sectors) through the resolution of scientific or technological uncertainty – and not simply an advance in its own state of knowledge and capability. The project must relate to the company’s trade, either an existing one or one that it intends to start up based on the results of the R&D.
Tax relief under the scheme can either be in the form of a reduction of the corporation tax liability, an enhanced tax loss or a tax credit (tax payment). An important point to be aware of is that making a claim does not in any way negatively impact on the profit & loss account or a balance sheet; the R&D claim will either reduce the tax charge, generate a payment of a tax credit or create a deferred tax asset.