R&D Tax Credits: Common Misconceptions and the Claims You Didn’t Know You Could Make

If you’re confused about your R&D tax claim, you’re not alone. Research estimates that £84bn in R&D tax relief available to SMEs remains unclaimed.That’s a lot of money that could be reinvested into our vital SME economy.

February 6, 2024

If you’re confused about your R&D tax claim, you’re not alone. Research estimates that £84bn in R&D tax relief available to SMEs remains unclaimed.

That’s a lot of money that could be reinvested into our vital SME economy.

HM Treasury has issued £33.3bn in tax relief to over 300,000 successful claims, since 2000 (when the scheme began) and 2018.

Although there has been a 10% increase in first time applicants in the most recent year’s available data, there is still general confusion as to who can claim, and for what.

Many companies assume that unless they wear lab coats to work or develop groundbreaking new technologies, they can’t claim. Not so!

Let Grantify tax expert Ian Bassett offer his exclusive insights into the common misconceptions around making a successful claim, and inspire your application.

Firstly, let’s take five minutes to get you up to speed with the details of the scheme, to make you feel more confident about moving forward with your R&D claim.

R&D Tax Claims Explained in 5 Minutes

R&D tax credits are a form of financial incentive, intended to encourage scientific and technological innovation in the UK.

The scheme enables eligible SMEs to claim back a significant portion of their R&D outgoings in the form of a cash payment, a corporation tax reduction or a tax rebate. You can use them to get up to 33% of your R&D costs over the past two years.

You can claim for a range of things related to your innovation activities, such as:

  • Staffing and salaries.
  • Consumables.
  • Software.
  • Subcontractors.
  • Utilities.

Who is Eligible for R&D Tax Credits?

The scheme is aimed at SMEs, meaning hundreds of thousands of UK organisations are eligible to apply. Eligible businesses must:

  • Be a limited company registered in the UK, with fewer than 500 employees and an annual turnover below €100 million (or a balance sheet below €86 million).
  • Be involved in researching or developing new technology for a product or service – that isn’t copying another business, but involves genuine uncertainty of success.

Businesses in any industry can apply, as long as they are claiming for research and development costs.

Claims must also demonstrate how your innovation project:

  • Looked for an advance in science or technology and aimed to achieve this advance.
  • Had to overcome scientific or technological uncertainty.
  • Overcame this uncertainty.
  • Could not easily be worked out by a professional in the field.

Don’t know if you’re eligible? Find out in just 90 secs

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Sounds Great! Why Don’t More People Claim?

The biggest misconception is that many people don’t realise that what they are doing is R&D. The popular belief is that R&D pertains to a machinist developing a new engine, or doing research in a lab. The companies I speak to are always surprised by what you can claim for. Grantify tax expert, Ian Bassett

“As long as your project offers technological or scientific advancement, you can apply. It doesn’t need to be groundbreaking either; these can be improvements in process and efficiency to existing systems or products.”

What else? According to Ian:

“Another misconception around R&D tax claims I encounter is that people often think they have to have paid corporation tax to claim it.

“Actually, this scheme does not have to be offset against any particular tax. If you have no liability you need to pay, then you’ll receive a payment. This surprises a lot of people.”

R&D Claims You Might Not Have Thought Of

So, what type of activities could be eligible? Here are some examples we’ve come across that you may not have considered:

  • Food production: If you work in the food manufacturing or catering industry, it could be as simple as developing a new and improved recipe, e.g. to lower salt content or remove an allergen. It also doesn’t need to be mass produced. You could be a local restaurant producing gluten free recipes for the first time.
  • Architecture – Many architects are not aware then can claim because they view improvements and problem solving to be core parts of what they do. But with so much of their work devoted to addressing technical uncertainties, it’s likely that significant parts of their projects would qualify.

Remember, what counts most is that you can demonstrate a technical or scientific advance. If even a part of your work improves efficiency, reduces costs and waste or even boosts sustainability, you should apply.

We asked Ian if there were any particularly interesting claims he’s worked on?

“Yes, quite a few actually. I helped a vegan food manufacturer submit their claim, which was really interesting. I also worked with a company that helps schools improve their sustainability programmes, and a company that has devised a novel way of securely sharing files.

“The sheer breadth of applications never fails to impress me. I really enjoy helping exciting UK companies benefit from this incentive; it feels great.”

My Company is Eligible. Now What?

The good news is that you can make your R&D tax claim entirely solo, but it does require an in-depth knowledge of UK tax law, plus how to cost a project 100% accurately.

You’ll need to create detailed technical narratives for your project, clear financial explanations and amend your CT600 to file to HMRC.

There’s also the fact that businesses that apply alone for the first time are highly likely to be audited after receiving the cash. If there are any discrepancies, you may be asked to repay every penny, sometimes up to a year after you’ve already spent the funds.

If you get it right – great; but if you don’t, you could find your application delayed significantly, or worse – you could be penalised by HMRC. Bad times.

Give Your Claim the Best Chance

There are dozens of consultancies out there eager to help you make your claim. We definitely recommend getting professional help but they can charge anything up to 30% of your claim. That’s a big chunk of money that you could be reinvesting in your business.

Luckily, there’s a much better way – with your experts at Grantify.

Our simple-to-use platform makes it easy to make your R&D claim, in an afternoon.

With just one call, we guide you through everything you need and can even write the entire application for you; taking the pain and pressure out of your claim.

Plus, our commission is just 12.5% on your first £125,000 – then 2.5% on the rest. The best news? We’ll only take payment if your claim is successful.

Once complete, your claim will be checked and submitted by one of our experienced accountants, who are all sale-listed by HMRC, meaning Grantify claims rarely get audited.

You’ll need a completed tax return to apply for R&D credits but if you don’t have one, then we’ll complete one for you for free, if you’re claiming more than £10,000.

With Grantify, on a typical claim of £300,000, you:

  • Keep 93.4% of your claim.
  • Spend just one afternoon of your time.
  • Get a free tax return.
  • Gain complete peace of mind.

Need help applying for R&D Tax Credits?

You may also be eligible for a Grant worth up to £2m

Find out more about our R&D Tax Credits services
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