Tax Relief Research and Development – Qualifying

Tax Relief Research and Development : Where a project aims to make an advance in science or technology, this is known as research and development (R&D) and opens up the possibility of tax relief. Therefore, any activities that contribute directly to achieving the advance will be known as qualifying R&D.

Science and Technology – What is Considered an Advance?

An advance is considered an advance in the overall knowledge or capability and not just the knowledge that the company has.

Qualifying advances involve those projects where overall knowledge or capability is extended. It also involves the creation of a process, material, device, product or service which also helps to improve the knowledge or capability. Along with this, it can also include improvements made to current processes, materials, devices, products or service via technological changes. While it can also cover the use of science or technology to duplicate the effect of existing processes, materials, devices, products or services in a new and improved way.

Scientific or Technological Uncertainty – What is it?

Uncertainty around science or technology exists when an understanding or knowledge of whether something is scientifically possible or technologically possible or how to achieve it in practice is not accessible or available. This can also be deduced by a professional who works in the field.

This uncertainly will often occur as a result of turning something that has been established as scientifically feasible into a reliable, reproducible and cost-effective process, material, device, product or service.

If uncertainties can be resolved by a professional who operates in the field, then they are not considered to be scientific or technological uncertainties. Along with this, improvements that do not alter the science or technology are not considered to be work to resolve scientific or technological uncertainty.

How Can You Identify Whether You are Undertaking Qualifying R&D?

Your company might qualify for the benefit if you have developed or are going through the process of developing a new or improved product, process or software system and have had to navigate both scientific and technological challenges as part of the process

Qualifying Costs?

Qualifying expenditure is broken down into categories for the enhances revenue deductions and these include:

  • Staffing costs
  • Externally provided workers
  • Software
  • Consumable materials
  • Clinical trial volunteers

The largest category of qualifying expenditure is staffing costs and this will also include all costs that are associated with employing people who are directly and actively engaged in all R&D activities. Therefore, this will include the likes of salaries, bonuses, employer’s national insurance and pension contributions.

If individuals give a small proportion of their working time to R&D activities then it is possible to claim the appropriate proportion of their employment costs. All expenditure that the company incurs that relates to capital equipment such as plant and machinery will not qualify for the enhanced revenue deductions. Despite this, this expenditure might qualify for 100% capital allowances in the period of acquisition. 

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