R and D Tax Funding

As featured in The Southern Reporter - www.thesouthernreporter.co.uk

If you asked the average business whether they carry out research and development (R&D) activities, most would respond to say they don’t. This might however be down to the perception that R&D involves laboratories and professors undertaking mysterious experiments to change the world as we know it. In reality, many businesses will be developing techniques, processes and products that would be considered clever at the least and in many cases innovative. Many would also like to develop their business activities in this way but face the barrier of funding the inevitable costs.

When the innovation extends to achieving an advance in science or technology R&D tax reliefs may come into play. The relief is available to companies and effectively gives an enhanced tax relief for an SME company of 230% of the qualifying cost. This results in 46% of the expenditure being funded by tax relief. Alternatively in a loss situation, the loss can be surrendered for a cash credit of 14.5% and this means 33.35% of the expenditure is funded.

Buying new technology for use in the business is not R&D but if the technology is developed or adapted for specific purposes, costs may qualify if new ground is being broken in a scientific or technological context. Many companies undertake this type of activity with being aware. The project need not necessarily even be successful.

Qualifying expenditure can include, for example, staffing costs, software or consumables used in the project and a large proportion of subcontracted costs.

Practical examples might include developing new technology or products in the IT industry, experimenting with new flavours in food and drink companies, development of new products in electronics. These are no more than a few examples of potential applications and essentially anything that involves a scientific or technological advance to a product or process may qualify.

In the context of companies in the agricultural sector, costs in relation to working on new products or processes, or improving current products and processes could qualify. This might involve development and innovation in breeding processes or management, treatment and care of livestock, including genetics and breeding, feed and nutrition, pharmaceuticals and vaccines, diagnostics etc. In addition, using modern technology to improve the precision and efficiency of agricultural management practices could also qualify and there would be significant scope for innovative ‘Agritech’ businesses looking to solve agricultural problems with technology. Essentially, development of any product or service to increase yield or productivity and improve farming efficiencies is likely to have an R&D angle.

More information is available in our R&D brochure. If you would like to discuss R&D tax credits, or discuss potential eligibility for a claim, contact Mark Thompson on 01573 224391 (Kelso), 01289 541988 (Berwick) or email mark.thompson@renniewelch.co.uk