Claiming R&D tax credits in the healthcare sector
UK companies within the healthcare sector are likely to spend a lot of their time and money on Research and Development (R&D). Whether it be developing new pharmaceutical products, improving current ones or building cutting-edge complimentary technology, the broad scope and variety of R&D in this sector is likely to be far more complex than in any other industry.
The healthcare sector itself is an apparently positive and fulfilling one. Businesses are often working for the greater good, be it through the launch of the latest wonder drug to cure a particularly nasty disease or pioneering a brand new piece of awesome technology. It’s this industry that can really change peoples’ lives on an impressive scale.
With this in mind, it’s hardly surprising that the amount of expenditure on R&D in the healthcare sector is pretty substantial. Around 48% of the £16.5 billion invested in UK Research and Development throughout 2016 was spent in the healthcare industry alone.
Most of the healthcare budget is spent on clinical development and preclinical research. Under the current legislation, much of the work done to make improvements and advancements is likely to be eligible for tax relief under the government’s R&D tax credit scheme, making it an important issue for companies to be aware of.
Examples of qualifying expenditure
Although this is by no means an exhaustive list, below are some common areas where R&D could take place in the healthcare industry:
Laboratories and developing/testing medication
A good example of Research and Development within healthcare is in developing processes with the aim of purifying chemical compounds to be used in respiratory illnesses. Whilst this might be a very obvious and logical form of R&D, as with all claims for R&D tax relief, a successful claim is not dependent upon the company offering a successful solution to a problem. Rather, simply the act of advancing science and technology and taking steps towards a final goal is enough to qualify.
Various types of NHS bodies, such as Mental Health Trusts and Primary Care Trusts, have an essential requirement to engage with their staff and users for the purpose of obtaining performance-related feedback. This is often done using staff, patient and user surveys. The development, administration and management of these surveys has led to R&D being undertaken in creating software algorithms especially for this purpose.
Specialist seat manufacture
When it comes to care homes for example, many providers require increasingly complex seating arrangements for the clients they look after. Seats need to be durable, hardwearing and also very easy to use for care home staff. For example, an arm chair that also has wheels on it to double as a wheel chair may need an extendable foot rest for use by multiple people at different times. R&D could be undertaken to create this footrest, which can then be operated effectively and easily using just one hand for example.
As you may have guessed, the parts and kits used in, for example, knee and hip replacement surgeries require very technically complex, specialised and intricately precise medical components. R&D tax relief could help with the costs involved in building the prototypes for such equipment as well as in developing a process that will help to scale it up to full production.
Developing new material compounds
Very similar to the development of orthopaedic instruments we’ve discussed above, this looks at the underlying materials compounds as opposed to the instruments themselves. R&D often takes place where a company is looking to develop either a brand new product, or where further work must be done on an existing product so that it can be brought to market.
What else can R&D tax credits cover?
As mentioned, the examples above are just a few of the claims likely to come from clients within the healthcare sector and it isn’t a comprehensive list. There are a large number of other examples in this industry and across many others. However, if your company is working to develop new or improved pharmaceutical products or other technology either on existing goods or to advance the industry itself, then this work will likely be eligible for tax relief under the government’s Tax Credits scheme. Don’t forget though that generally the success or failure of your Research and Development is not the most important bit when it comes to a claim - it’s the simple fact that you’re undertaking it that matters. This means your company should not be penalised if it is unable to achieve the results it was hoping for.
R&D tax credits can also be claimed on the costs involved in employing staff who are actively or directly involved in the research and development work itself, as well as to help with the costs of materials used. In certain cases, payments made to subcontractors that have also worked on the R&D project in question can be included too.
The tax credits scheme essentially allows businesses to claim some of their corporation tax back. This is dependent on how much has been spent on research and development, and how much of those costs meet the scheme’s eligibility criteria.
How much will my company be able to claim back through R&D tax credits?
Your company can claim back up to 33% of qualifying expenditure. If your business has made a loss, it can still claim up to 14.5% as a cash refund.
The procedure in making a claim for R&D tax credits is not always straightforward and it’s well worth using a specialist R&D tax firm that really knows what they’re doing, as each claim will be looked at closely by Her Majesty’s Revenue and Customs (HMRC). This is what makes it so important that you fully understand exactly what types of things you can claim for and what is not allowed as well.
To help you gain a more specific idea of how much you can claim through R&D tax credits, Tax Cloud has created an accurate, easy to use tax calculator for businesses. Simply enter a few details and you may be surprised what your company could be entitled to.
The calculator is powered by Myriad Associates, our parent company who are experts in all aspects of R&D tax relief and would be pleased to answer any questions you may have. Call us today on 0207 118 6045 or use our contact page.
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