Research and Development Tax Consulting

Lovewell Blake Tax Partner Mary Schofield

Working with you to identify qualifying R&D spending and maximise the relief to the benefit of your business.

Lovewell Blake Tax Partner Mary Schofield

To encourage innovation, the government has been offering generous tax reliefs for companies engaged in research and development (R&D) for several years now. 

Often an assumption is made that only companies such as scientific or medical research companies are eligible. However, these tax incentives in fact potentially apply to a very broad range of activities and you may well qualify.

Even if you are not yet making a profit you can benefit from the relief too.

Our R&D Consultants get to know your business operations, how you are innovating and work with you to prepare R&D claims and much more:

​Essentially, if your company is engaged in projects which seek to achieve an advance of some sort in overall knowledge or capability in a certain field of science or technology, then you could be classed as being engaged in R&D activity.

Additionally, you do have to be able to demonstrate that the advancement was not readily deductible by any competent professional in the field. In practical terms, a broad range of activities could be included. Some examples are:

  • Developing a new product
  • Improving an existing product
  • Creating a new process
  • Creating certain computer software.

The types of costs that can qualify for R&D tax incentives include:

  • Staff costs for employees involved in the R&D, apportioned based on their time spent on the qualifying activities
  • Costs of subcontractors or externally provided workers assisting the R&D (usually restricted to 65%)
  • Software used in the R&D, apportioned between qualifying and non-qualifying activities
  • Costs relating to items consumed in the qualifying activities, such as materials used in creating a prototype or testing a process. Fuel, power and water may also qualify.

It may well be that your company is already engaged in some of these activities and you could qualify for this generous incentive. Small and medium sized companies are eligible to claim an additional 130% (86% from April 2023) tax relief on all qualifying expenditure.

How do R&D Tax credits work:

  • Company A spends £50,000 developing better packaging to maintain the quality of their product
  • R&D tax relief will allow an additional £65,000 (£43,000 from April 2023 (to be deducted from the company's profit for tax purposes)
  • This means the overall reduction in the company A's tax bill as a result of the R&D expenditure is up to £12,350 (£10,750 from April 2023).

Our R&D consultants have built up a considerable amount of R&D consultancy experience since the incentives were first introduced by the UK government at the turn of the millennium. 

We provide R&D guidance to companies of many different sizes, across multiple sectors claim tax relief on their R&D expenditure. Get in touch to speak to one of our R&D specialists.

Research and Development Tax Credits statistics

The statistics show the first ever decrease in the total amount of relief claimed by businesses year on year. A 7% decrease.

In contrast, the number of Research and Development (R&D) claims submitted has increased again by 11%.

We are probably seeing the impact of the covid pandemic suppressing the ability to innovate and generally reducing spend.

In the post pandemic period we would suspect that those numbers will climb significantly, especially in response to the current economic conditions.

There has also been a drop in the number of first time claimants for the first time since 2010, a drop of 4%. This could be down to some of the recent negative press and ‘cold callers’ putting businesses off making a claim.

At Lovewell Blake we work with businesses who complete genuine R&D to establish and submit a claim, but we do stand firmly against bogus claims and are pleased to see the increased HMRC crackdown on fraudulent activity.

The full article from HMRC can be found here.

If you would like to discuss claiming R&D tax credits, our specialist team are available to help you.

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We pride ourselves on providing individually tailored services to our clients. Whatever your aspirations and priorities in business and life, we will be by your side with expert advice from local specialists. It is because your needs are unique, that the solutions we provide are distinct and personalised to you.

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