Insights

One company tax relief that is not expected to change in the 2020 Budget is R&D tax relief. Since it was started in 2001, the number of successful claims submitted has steadily risen by 35% to over £4bn last year. In total, the government has already returned £26bn in total tax relief to companies across the UK and the scheme still isn’t being fully utilised.

Many companies continue to miss out because they don’t realise they qualify yet they could be making an R&D tax credits claim.

In the more traditional industries like manufacturing, construction, IT and finance, R&D tax credits are well utilised, but what about other very dynamic professions and industry sectors? Here are seven sectors offering huge scope for making an R&D tax credits claim.

Architecture

Vertical forests and living roofs demonstrate that architects frequently need to overcome novel problems in order to the design dreams of their clients and these may involve environmental, engineering or technology-based advancements. If this is the case, these projects can qualify for R&D tax credits. For example, designing bespoke features, testing and prototyping, improving energy efficiency, adapting practices when working on heritage or listed structures, tackling acoustic issues, or new thermal or lighting requirements.  

Catering

As Gregg’s can demonstrate, even something as humble as a sausage roll can be enhanced to suit new eating trends.  Food production is a highly innovative sector now and catering offers huge potential for the use of new ingredients, food additives and manufacturing processes. For instance, work to increase food shelf life, substituting ingredients known to be allergens or changing textures. Gluten free and plant-based foods are a prime example where there is plenty of scope for making an R&D tax credits claim.

Clean tech

Clean tech is an obvious contender for R&D tax relief and there is a huge amount of interest in this sector currently. Qualifying projects can be anything from designing carbon-neutral products in a lab to recycling innovations, renewable energy projects, solid waste management, or novel sewage treatments.

Textiles

Just like clean tech, the textile industry is another sector rife with opportunity, especially where the materials are also sustainable or using recycled products. Qualifying projects could include anything from new production methods to a new process for creating a pattern, improved manufacturing efficiency or designing a brand new eco-material to reduce waste.

Sex toys

Whether they are aimed at men or women, this is an industry at the forefront of R&D with an ever increasing number of inventions.  Whether it’s ‘intelligent companions’ using AI or ‘fem tech’ gadgets, much of this work is pioneering software and product design engineering which would easily qualify for R&D tax relief.

Sports clubs

Advancements made within sports nutrition, injury rehabilitation and training programmes can also qualify for R&D tax credits and an increasing number of sports clubs – football being a good example – are benefiting from R&D tax credits applications.

Vineyards, breweries and distilleries

Just as food is going through an innovation revolution, so too are wine, beer and spirits producers. Projects to reduce alcohol and sugar content, remove additives or experiment with new flavours and techniques can all qualify as R&D work.

Document R&D expenses carefully

If you are involved with innovative projects and want to make a claim, it is essential to maintain very accurate records of expenses and to carefully record all the technical details of your R&D activities. A recent case involving Teksolutions-Inc Ltd demonstrates the pitfalls associated with not doing this. They claimed R&D tax credits giving rise to losses totalling £398,325 for two periods to 20 October 2015.

After an investigation, HMRC issued a closure notice reducing the trading losses for each of these two periods to nil. In spite of an appeal, HMRC argued Teksolutions’ claim lacked documentary support and it was unclear whether the listed R&D expenses had already been included in earlier tax returns that had been filed. In this case, the company’s software systems had been hacked and much of the evidence destroyed. There were no records of expenditure like wages, subcontractor payments, accountancy and audit costs, some of which were future expenses. This was an extreme and complex case, but the underlying message is relevant to all companies considering an R&D tax credits claim. A successful tax relief claim should always be supported by detailed evidence explaining the costs on qualifying R&D activities.

If you would like to discuss making an R&D tax credits claim, please contact partners@rjpo.co.uk.