Insights

Understanding where and how the best ideas are generated has been turned into a multi-million-pound industry. In this article we will discuss how you might be able to take your good ideas and potentially turn them into a tax saving too.

Contemporary authors like Malcolm Gladwell and Steve Johnson have all shared theories of idea creation and made a fortune in the process. They offer some interesting insights, but what’s intriguing is the notion that there’s actually no such thing as a Eureka moment when it comes to innovation. Typically, when the best ideas happen, it’s more of a slow burn than a sudden spark; thoughts mulled over by the originator for many years before finally coming to fruition.

So, ideas might need a long incubation period but often they also need the opportunity to connect with other ideas to be transformed into innovation. You might be wondering where this is going, but there’s a clear tax relevance for entrepreneurs. As business owners, our success relies on being more creative and innovative, on having better ideas and ways of doing things than our competitors. That needs investment and resources, which can come with a significant cost attached. Frequently, when companies make these investments and develop new ways of working, whilst they might foresee financial returns in the form of new sales, they may be unaware of the potential to use tax relief to recoup the costs they incur during the process.

For companies in the UK, one of the best ways to achieve this is by claiming R&D tax credits. These enable a company to offset 230% of its R&D costs by either reducing its corporation tax bill, or by obtaining a cash rebate if the company is loss-making. To access the relief, it’s not necessarily important to demonstrate ground-breaking innovation, but to demonstrate a technological advancement leading to a new, improved way of working. This means that R&D Tax Credits are potentially available to any company in any industry – provided they can demonstrate they have met HMRC’s qualification criteria.

A wide range of companies are eligible to claim R&D tax relief – software developers, design companies, businesses launching a new technology or management process, or using it for their internal systems, specialist manufacturers, biotech companies and many more. In fact, in 2016, over 20,000 claims were submitted to HMRC across a wide range of industries.

Here are some of the ways it’s possible for a company to access R&D tax credits:

• Identify technological improvements to boost the performance of existing products and processes – including developing new IT systems to replace paper processes;
• Design and commission a prototype product, including quality testing and final build costs;
• Apply green or sustainable technology and methods in an innovative way;
• Identify alternative materials to replace and improve existing product components or materials.

We have helped many companies to secure R&D tax credits and our successful claims have included:

• Internal development of new web-based Customer Relationship Management system;
• Development of an internal bespoke time recording and billing system;
• Translation of software into foreign languages;
• Development of iPad and iPhone applications;
• Development of a new website providing innovative uses for customers;

Some questions to ask yourself

If your company is engaged in projects that could qualify for R&D Tax Relief, start asking yourself the following questions. If you can answer positively to each one, there is a good chance your company is eligible for some tax relief.

• Are you working on an innovative project?
• Does your project have a defined start and end date?
• Is it in a field of science or technology?
• Is the work you are doing improving what is currently available in the marketplace?
• Are you pursuing a scientific or technological advancement?
• Is there a degree of scientific or technological uncertainty involved?
• Is the knowledge or capability involved not readily available? Or is it not easily deducible by a competent professional?
• Are you spending time investigating and testing the results?

Alternatively, take our handy test to see if you qualify

RJP will be able to assess your eligibility and we handle applications for R&D tax credits on a no win no fee basis. Great idea! What have you got to lose?

For more information on how to turn your ideas into money with R&D tax credits, contact partners@rjp.co.uk.

https://rjp.co.uk/rd-tax-relief-quiz/