7 Most Common Misconceptions About R&D Tax Credits

Ever since the R&D Tax Credits scheme was launched in the year 2000, it’s been regarded year on year as a resounding success. In fact, each year as much as £4.3 billion of tax relief support is claimed in the UK, offering a valuable cash injection for businesses of all sizes in all sectors.

Investing in the future growth and development of a company is a costly process, and R&D Tax Credits are designed to help with it. Businesses are naturally cautious, but they know that in order to survive they will need to spend money on building new technologies, modifying infrastructure and improving processes. R&D investment is the key driver of economic growth across the world, which is why governments are often very keen to encourage it. However, there are still many misconceptions around R&D tax relief which can mean companies missing out on thousands. Here we lay some to rest for good.

1. You can’t claim R&D Tax Credits if your project failed. FALSE

Many businesses believe - mistakenly - that if they had to abandon their R&D work or the project ultimately failed in its goal then it won’t attract R&D tax relief. This actually isn’t true, because the main thing is that R&D work is undertaken - it’s about the ‘journey’ not necessarily the end goal. In fact, failed projects often strongly indicate that R&D work has taken place, which is therefore likely to qualify for the relief. Technical difficulty, experimental work and waste are all signs of scheme eligibility and can make up a major part of any claim.

2. Only companies that are in profit can claim. FALSE

Over past years, we’ve found that many companies don’t claim for R&D Tax Credits just because they aren’t profitable. This lack of profit could be for all sorts of reasons, but is particularly common in start-ups. Such companies often mistakenly believe that the relief is not aimed at them, which is completely untrue.

Loss-making companies can receive R&D Tax Credits as long as their application is deemed successful in the eyes of HMRC. How much a business receives however is dependent on the regime it claims under.

SMEs that have made a loss can claim between 14.5% and 33% of eligible R&D expenditure, whilst bigger loss-making companies or subsidised projects can attract relief totalling 9.7%.

Loss-making SME companies can also decide to carry the award forward/backwards against profits, instead of surrendering the R&D loss.

3. There’s a minimum spend to be eligible. FALSE

There’s no minimum (or maximum) amount that a company needs to have spent on R&D work in order to make a claim for R&D tax relief. Some businesses mistakenly believe there is a minimum, probably because there used to be prior to April 2012. In the years before then, businesses needed to have spent a minimum of £10,000 on relevant R&D projects in order to claim R&D Tax Credits, however this is no longer the case. R&D Tax Credit applications can be submitted for even the smallest amounts, which is fantastic news for very small companies and those with limited budgets.

4. Configuring an existing IT package constitutes R&D. FALSE

Unfortunately, simply putting together systems that are readily available on the market, however tailored and intricate they may be, doesn’t mean the work is eligible for R&D Tax Credits. Only IT projects that truly advance modern computer technology or break new ground will likely qualify for the scheme. HMRC rules regarding this can be very difficult to navigate, which is why it pays to talk to R&D tax relief specialists such as ourselves.

5. You can’t claim for R&D work that has been completed by a subcontractor. FALSE

Currently, product development that has been outsourced to partners or subcontractors can usually be included in an R&D Tax Credit claim, but it depends on your company’s size. This can be particularly helpful to smaller companies for whom pooling resources and collaborating with others is vitally important. Subcontracting is a rather complicated area, so again we recommend contacting us for the latest advice.

6. R&D tax relief is all about scientists in white lab coats. FALSE

Eligible R&D activities go way beyond that. Yes it can be about pure science-based research and development costs (laboratory costs, scientists’ salaries etc.), but it’s open to every business regardless of sector. From IT to engineering, manufacturing to retail, as long as there has been an element of scientific or technological uncertainty then it’s likely to qualify.

7. Making a claim is fairly quick and easy. FALSE - so don’t go it alone!

This one highly depends on how you go about making your claim. Unfortunately yes, the claims process is not particularly straightforward. The rules are pretty draconian and it’s easy to make incorrect calculations, use the wrong wording in your application or miss something off. The fact-finding part of the process can be also be laborious, depending on the records you’ve kept, and you’re likely to have questions you need answering along the way.

Essentially, if you tackle an R&D Tax Credit claim on your own it’s much more likely that your application could fail, plus it may also trigger an expensive and stressful tax enquiry by HMRC. This is why it’s so important to use the services of R&D tax relief specialists such as ourselves. We know the application process inside out and can guide you through it quickly and painlessly for the best chances of success.

How Tax Cloud UK can help

Tax Cloud UK is a cutting-edge, effective online portal designed to take the pain out of claiming R&D tax relief. Developed by the expert R&D tax team at Myriad Associates, there are separate sections for both businesses and accountants where your own figures can be added to easily see what you could claim.

Tax Cloud are specialists in all aspects of R&D tax relief assistance for UK companies. Made up of skilled accountants and tax experts, we have a proven track record in making successful R&D Tax Credit claims so you can rest assured you won’t miss out. If you think you may be eligible, contact us today on 0207 118 6045 or use our contact page. You could well be surprised at what you can claim.

Barrie Dowsett, ACMA, GCMA
Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud
Latest posts
2ND APRIL, 2020 Imagine What £65,000 Could Do For Your Innovative Company - Think R&D Tax Credits
24TH MARCH, 2020 What Is Entrepreneurs Relief?
17TH MARCH, 2020 How R&D Across The World Is Helping To Fight Coronavirus
11TH MARCH, 2020 Top 10 Reasons Why Your Business Should Invest In Social Media
3RD MARCH, 2020 Top 5 Easy Ways To Speed Up An R&D Tax Relief Claim
25TH FEBRUARY, 2020 How Does Using Tax Cloud Compare To Making A DIY Claim For R&D Tax Credits?
18TH FEBRUARY, 2020 Latest Statistics Around R&D Spending In The UK Since 2017
11TH FEBRUARY, 2020 Easy Mistakes That Accountancy Firms Make Regarding R&D Tax Credits
4TH FEBRUARY, 2020 Tax Cloud Announces New Reduced Pricing
27TH JANUARY, 2020 5 Ways Charities Are Using R&D Advances In Virtual Reality
21ST JANUARY, 2020 Soft Drinks Sector - What Are The R&D Challenges?
15TH JANUARY, 2020 Science Fact: R&D and Eco-Robots
3RD JANUARY, 2020 5 New & Innovative Technologies Helping To Cut UK Food Waste
17TH DECEMBER, 2019 5 (Legal) Ways To Reduce Your Corporation Tax bill
10TH DECEMBER, 2019 Continuing Innovation After Brexit
4TH DECEMBER, 2019 8 Important Factors To Consider When Starting Up A Business
26TH NOVEMBER, 2019 Are You A Growing Business? Get Money From The Government To Help With The Costs
19TH NOVEMBER, 2019 Why Construction Companies Should Embrace R&D Tax Credits
13TH NOVEMBER, 2019 7 Most Common Misconceptions About R&D Tax Credits
5TH NOVEMBER, 2019 How Should I Allocate My Staff Time For An R&D Tax Credit Claim?
31ST OCTOBER, 2019 Do R&D Tax Credits Represent Value For Money For The Government?
22ND OCTOBER, 2019 What Are The Four Main Benefits Of R&D Tax Credits?
14TH OCTOBER, 2019 Flight Shame Has Landed - But Could R&D Be The Aviation Industry's Ticket To Greener Travel?
10TH OCTOBER, 2019 What Power Does HMRC Have Over My R&D Tax Credit Payment?
1ST OCTOBER, 2019 Why Do Some Applications For R&D Tax Relief Fail?
24TH SEPTEMBER, 2019 R&D Tax Credits: What Happens If I Need To Switch From The SME Scheme To The RDEC Scheme, Or Vice Versa
17TH SEPTEMBER, 2019 What Financial Help Is Available In The UK For Entrepreneurs?
10TH SEPTEMBER, 2019 What Consumables Can Be Claimed Under R&D Tax Relief?
3RD SEPTEMBER, 2019 How Long Does It Take For HMRC To Make A Decision On An R&D Tax Credit Claim?
29TH AUGUST, 2019 What Is The Most Efficient Way Of Submitting An R&D Tax Credit Claim?
21ST AUGUST, 2019 Are Businesses In Wales Getting The Most Out Of The R&D Tax Credits Scheme?
13TH AUGUST, 2019 How Can Companies Find Extra Money To Help Prepare For A No Deal Brexit?
6TH AUGUST, 2019 Quick Guide To R&D Tax Reliefs In Engineering
31ST JULY, 2019 Claiming R&D Tax Credits In The Healthcare sector
26TH JULY, 2019 How Can Businesses Make R&D Investment A Priority?
18TH JULY, 2019 How Will Brexit Affect R&D Tax Credits?
12TH JULY, 2019 Tax Cloud Launches In Ireland
5TH JULY, 2019 How To Claim A Critical Tax Boost For Your SME
5TH JULY, 2019 R&D Tax Credits Made Simple And Affordable
28TH JUNE, 2019 Why Are SME’s Missing Out On R&D Tax Relief
14TH JUNE, 2019 Is My SME Eligible For R&D Tax Credits?
3RD JUNE, 2019 Why Use An R&D Portal Over An R&D Advisor?
24TH MAY, 2019 How SMEs Can Benefit From R&D Tax Credits
14TH MAY, 2019 Charities Benefit Following Tax Cloud's Successful Show at Accountex
25TH APRIL, 2019 Tax Cloud's Most Innovative Companies 2019
12TH APRIL, 2019 Accidental Innovation - Tax Cloud's Top 8
5TH APRIL, 2019 A Practical Guide To R&D Tax Relief At Accountex 2019
27TH MARCH, 2019 What Software Projects Qualify For R&D Tax Credits?
15TH MARCH, 2019 3 Automotive Innovations To Look Out For In 2019
1ST MARCH, 2019 What Is Research And Development In Business?
22ND FEBRUARY, 2019 Growth Hack: Tap Into R&D Tax Credits
15TH FEBRUARY, 2019 Beyond R&D Tax Credits - Public Funding For Your Innovative Start-up
1ST FEBRUARY, 2019 5 Steps To Deliver An Optimised R&D Tax Credit Claim
25TH JANUARY, 2019 Top Tax Cloud FAQs
16TH JANUARY, 2019 What Projects Qualify For R&D Tax Credits In The Medical Industry?
11TH JANUARY, 2019 Accounting Practices Are Generating Fee Rates Of £325/hr
2ND JANUARY, 2019 R&D Tax Credits - It's Not As Difficult As You Think
14TH DECEMBER, 2018 4 Ways To Determine If You Qualify For R&D Tax Credits
26TH NOVEMBER, 2018 What Projects Could Be Eligible For R&D Tax Relief In Manufacturing?
2ND NOVEMBER, 2018 How To Know If Your Business Is Entitled To R&D Tax Credits
25TH OCTOBER, 2018 Why Isn’t The Agricultural Industry Claiming R&D Tax Credits?
10TH OCTOBER, 2018 Is Your Business Eligible For R&D Tax Relief?
3RD OCTOBER, 2018 The Most Common Mistakes People Make With R&D Tax Credits
18TH SEPTEMBER, 2018 #1 R&D Tax Claim Portal ‘Tax Cloud’ Launches Xero Integration
14TH SEPTEMBER, 2018 What To Look For In An Online R&D Tax Credits Claim Portal
7TH SEPTEMBER, 2018 5 Ways To Grow Your Accountancy Practice
31ST AUGUST, 2018 Common Pitfalls To Avoid While Claiming R&D Tax Credits
24TH AUGUST, 2018 How Far Back Can I Claim R&D Tax Credits?
17TH AUGUST, 2018 Should I Use A Specialist Or My Accountant For My R&D Tax Credits Claim?
27TH JULY, 2018 3 Things To Consider When Making An R&D Tax Credits Claim
13TH JULY, 2018 R&D Tax Credits – Don’t Fall Through The HMRC Trapdoor
25TH JUNE, 2018 Tax Cloud Shortlisted For Innovation Of The Year
30TH APRIL, 2018 Benefits Of A Self-Service R&D Tax Credit Portal
13TH MARCH, 2018 R&D Tax Credits Platform Tax Cloud Celebrates 100 SME’s Seeking Expert Support
5TH FEBRUARY, 2018 How R&D Tax Credits Can Help Your Startup Grow
29TH JANUARY, 2018 Getting The Best Returns From Your R&D Tax Credits Claim
22ND JANUARY, 2018 Introducing: The Tax Cloud Partner Programme
18TH JANUARY, 2018 What Costs Can You Claim Through R&D Tax Credits?
9TH JANUARY, 2018 Common Misconceptions About R&D Tax Credit Claims
5TH DECEMBER, 2017 R&D Tax Credits Made Simple For Small Businesses
20TH NOVEMBER, 2017 The 3 Things You Need To Consider When Making An R&D Tax Credits Claim
Popular Tags
Start your Tax Cloud claim now Discover if you qualify and ensure your R&D tax claim is maximised. Get started
Powered by Myriad Logo

Myriad Associates helps businesses maximise tax reliefs and secure R&D grant funds. We specialise in R&D Tax Credits, Video Games Tax Relief, Innovate UK grants, Horizons 2020 grants, and Research and Development Capital Allowance Claims.

  • Submitting R&D tax claims since 2001
  • 100% success rate
  • Over £100m claimed and counting
  • Industry leading specialists
  • In-house technical, costing and tax experts
  • Member of the Research and Development Consultative (RDCC) committee

Meet some of the team behind Tax Cloud

Barrie Dowsett Barrie Dowsett ACMA CGMA Chief Executive Officer
David Farbey David Farbey MA, FISTC, FRSA Technical Consultancy Director
Lisa Waller Lisa Waller CTA, ACCA R&D Tax Manager
Lauren Olson Lauren Olson MA, MISTC Senior Technical Consultant