Research and development (R&D) tax relief was introduced by the UK Government to encourage UK companies to invest in more innovation-focused projects and maintain the country’s position as a global leader in science and technology. The scheme offers those investing in product or process improvements significant tax breaks provided they meet the required criteria.
There are, however, a number of assumptions and misconceptions about R&D tax relief, which can lead companies to making erroneous claims, which are likely to be rejected, or to not claim at all. To give businesses more clarity on the matter, I’ve exposed some of the myths about R&D tax relief.
Myth 1: Routine testing does not qualify for relief.
Provided the routine testing is required to either confirm the resolution of an uncertainty (e.g., to confirm the performance of a newly developed metal coating process) or confirm that an advance in science or technology has been achieved then it can qualify.
Myth 2: You can not claim relief if you are subcontracted to do work for another company.
It very much depends on who is responsible for identifying and resolving technical uncertainties. If the commissioning company expects your business to identify and resolve technical risks then you would be eligible to claim relief on the associated costs. Likewise, if your business is bearing the financial risk in this process and is expected to incur any budget over-runs or additional expenditure then you may also be eligible to claim subsequent relief.
However, if the commissioning company has already identified the technical uncertainties and has identified how to resolve these, but subcontracts the research activity, then it will be entitled to claim relief on 65% of the subcontractor costs.
Article originally published on Make UK
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