How To Know If Your Business Is Entitled To R&D Tax Credits

R&D tax credits are great incentives for businesses who on average claim £85,000 per year.  However, despite this generous incentive being in place for over 17 years still, many businesses aren’t claiming or reaping the rewards they’re entitled to. So, how do you know if what your business is doing is classed as R&D?

Government’s Definition of Qualifying R&D

Thankfully the government’s definition of what is classed as research and development is relatively broad. The key phrase in their definition is that the R&D project must from the outset aim to make a technical advancement in a product, process or software over and above what is already available.  The project needs to challenge your experienced team.

No matter the size of your business, as long as your company is attempting the above then you could be carrying out an eligible R&D activity.

More specifically, if you are:

A. Creating a new product, service or process


B. Improving an existing product, service or process technologically/scientifically

Then your chances of eligibility for this scheme are very high. 

For example, you have an idea for your business but aren’t quite sure if it’s technologically or even scientifically viable. You can’t find anything on the public domain that already exists.  You’re not currently able to put this idea into practice until further research is done. You need to hire a small team of engineers, you may even want to put time into researching and testing this yourself as it interests you. Said research is your attempt at resolving that ‘scientific or technological’ uncertainty, thus qualifying you for your R&D tax credits.

Defining The Boundaries of R&D Tax Credits

Ok, so we know what R&D is, now we need to define the boundaries. Where does this R&D start? And at what point is it considered to have ended?

It starts the moment your business seeks to improve or advance the technology or science behind your project.

R&D ends when the uncertainty factor of the idea has been eliminated, regardless of a positive or negative outcome. Any activities beyond this point are no longer considered R&D, for example, user testing stages and marketing efforts.

Does Your Project Qualify?

For your project to qualify it needs to be a solid attempt at advancing the technology or science in your field of work. It is good to have a solid R&D plan in place, so you are fully aware of what stage you’re at throughout the process.

Of course, sometimes the fruits of your labour don’t turn out what they were meant to be, and your R&D can be unsuccessful. This doesn’t mean your project doesn’t qualify, it was just that, upon the testing phase, your outcome was not as expected. When working with science and technology, unsuccessful attempts are an inevitability and can’t be avoided, unless you’re REALLY lucky.

So, What Isn’t R&D?

Generally, if you are just copying an existing product or process, without trying to improve or advance it in any way, this is considered not to be R&D.

If you’re trying to cosmetically or aesthetically improve a certain product or process, this is also not R&D unless the aesthetic and cosmetic alterations are a by-product of a technological or scientific improvement.

Interested in knowing whether you qualify for the SME R&D Tax Credits Entitlement?

Speaking to the team of specialists at Tax Cloud today will enable you to determine whether your business matches the necessary criteria and whether any credits can be claimed for the R&D projects you have conducted. Click here to contact us today for more details.

Barrie Dowsett, ACMA, GCMA
Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud
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Myriad are the creators of Tax Cloud, we help enterprises navigate, apply and secure tax incentives and grants. We specialise in R&D Tax Credits, Creative Tax Reliefs, Innovate UK grants, Horizon Europe grants, and R&D Capital Allowance Claims.

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Barrie Dowsett Barrie Dowsett ACMA CGMA Chief Executive Officer
Jillian Chambers Jillian Chambers Technical Analyst/Writer
Lauren Olson Lauren Olson Technical Analyst Manager
Rabia Mohammad Rabia Mohammad Corporate Tax Associate