The 9 most asked questions about R&D
Research & Development (R&D) tax relief information can often be confusing.
Not only are there different ways you can claim, and different schemes you can claim under, but also the legislation around what you can claim for is ever-changing.
Having worked in the R&D industry for the past four years, I speak with first-time claimants all the time and tend to receive the same questions.
Below I’ve helped answer the eight most common to guide those who are looking to make a claim but are unsure where to start!
You could also watch this short playlist if you’re on the move!
What is R&D Tax Relief?
R&D tax relief is a government incentive which has been designed to reward Ltd companies for their innovation projects.
Now, you should note that your interpretation of R&D could be different to HMRC’s guidelines, so it's essential that you understand the difference before proceeding with a claim.
1) Is there a financial threshold I need to reach to make a claim?
6 Ways to Maximise my R&D Claim
This blog will help you make the most of your R&D claim and maximise your returns!
As this process will take up some of your time and resource, it’s best to understand the financial attributes of your R&D projects. To do this, I would consider the cost categories which you can find in my blog; “6 Ways to Maximise my R&D claim”.
As a guideline, as long as you can link approximately £50K of expenditure within your “claimable period” then claiming R&D will be a worthwhile exercise.
2) Does my business qualify for R&D tax relief?
This question is asked in 101 different ways but, ultimately, to know if your project qualifies it will need three things:
An advance
This is a significant step forward in overall knowledge or capability within the field of science or technology. You need to look at what your sector currently offers as a solution and be looking to develop a better alternative. This can be in the form of a product, process, tool, method etc.
A technological uncertainty
This means that the journey you have taken to create your “advance” and the technology you’ve used, needs to have been faced with risk as well as uncertainty as to whether your desired outcome could even be achieved. I.E You couldn’t have simply taken “off the shelf/readily available” solutions and implemented them into your project to reach your desired results.
A competent professional
This is a person within your project who can determine if a technological and/or scientific advance has been attempted/reached. I.E., this person would understand the limitations of their industry and therefore would be able to advise if you can use an available solution or if R&D activities are necessary.
Typically, this person has been in their field for many years, has worked on a variety of projects and is degree educated (although not necessary).
3) What is technological uncertainty?
This is a great question and one that comes up a lot. Unfortunately, R&D is not black and white and therefore it's not always easy to tell the difference between the above.
But to get you started, think about pain points vs risk and doubt.
A normal business problem will face several pain points but ultimately you are confident that the solution you have chosen will work, so there’s no risk. Sure, it might be an expensive and laborious option, but you know it will work – it will just be a pain to solve.
An R&D problem is the opposite of the above.
It's those projects where there is risk and uncertainty attached to the solutions you attempt to reach. Typically, you will know if there is risk and doubt when your problem-solving activities involve: trial and testing, feasibility studies, experimentation, phased approaches, failure and go back to the drawing board, re-design, re-iterate, try it-test it-try it-test it and so on.
But what if your project fails? For whatever reason you haven’t managed to reach the advance you wanted to, don’t worry, you can still make a claim. The very fact that you have actively invested time, money, and resources in trying to advance your sector highlights that you have experienced an R&D journey and therefore would still be eligible for an R&D tax break too.
To gain a better knowledge of this particular question, check out my “What’s the Difference blog” here!
4) Can my accountant do my R&D Claim?
This blog will help you start your R&D claim journey.
The answer is yes. However, much like your other options of either doing the claim yourself or choosing to use an R&D specialist, it depends on your business’s specific needs to which is best for you and maximising your claim.
You will want to check out my blog on “Three Ways to Claim R&D” to better understand each option's pros and cons.
5) How much does an R&D claim cost?
your claim, which is highlighted in the comparison blog above. But to give you a quick idea, see below:
- Doing it yourself: This only cost is your time. Ask yourself - will that be time well spent or wasted?
- Going through your accountant: You may be looking at an hourly charge or a success fee of up to 20%
- Going through a specialist: Typically, you are looking at a no-win-no-fee of up to 30% of the overall benefit identified
6) How much can I get back for an R&D claim?
This is like asking how long is a piece of string. And with the new legislative changes coming from April 2023, the figures will change once again. But to give you an idea, depending on which scheme you go through (SME vs RDEC – more information on this below), you are looking at anywhere between 10-27%* of your total R&D spend.
7) What is the difference between the R&D SME vs RDEC scheme?
As of June 2023, there are 3 scheme options available for your claim:
The SME Scheme
The SME Scheme is for companies that meet the following conditions:
A staff count of less than 500.
Turnover not exceeding €100 million (Euros)
Balance sheet total (current assets plus fixed assets) not exceeding €86 million (Euros)
The RDEC Scheme
This scheme is for all other claims that don’t meet the criteria for the SME Scheme.
A mix of both?
There are a couple of ways that you may fall from the SME into the RDEC scheme, which normally includes conversations around grant funding and subsidised costs. If in doubt, speak to a specialist to understand where you sit.
Changes are coming to these avenues from April 2023 so check out my YouTube playlist on that to stay up to date here!
8) How long does an R&D claim take?
The length of time it takes to make a claim really comes down to two things:
1) How detailed your project is (for example if you are claiming for 1 small project lasting a few months or 10 big projects spanning 2 years)
2) Your benefit option and how you chose to enjoy it.
Typically, from my experience, you should give yourself a 6 to 12-week window from start to finish. This includes the time it takes for your specialist to gather the information they need including telephone/teams conversations, site visits, report writing, benefit calculations etc., as well as the waiting for HMRC to process your benefit. Also, be aware that if you have any current or outstanding arrears with HMRC, they will look to take this from your benefit first.
9) What does a good R&D specialist look like in the market today?
I have another blog that speaks specifically to this topic right here. However, for quickness a good R&D provider should be seen as leaders in their right. The should be sharing up to date and relevant content in a multitude of forms via social media/ blogs/videos/case studies/webinars etc.
The best companies to work with are those who seek to educate. So look for that when you do your homework.
Closing thoughts
I hope that helps you on your R&D journey. If you would like to follow up on any of the points, please reach out via the contact me page here or via karen@innovationinsights.uk!