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Uncovering innovation from within a business is rarely a simple process. You’ll often find it buried within different aspects of an organisation, and in some cases it’s even outsourced. But, it’s important to know that R&D tax benefits hidden within your work could give you an edge on your competitors.

Whether it’s a digital agency designing a new app, an architect improving building efficiencies or a food manufacturer developing production techniques, innovation can come in all different shapes and sizes, and is seldom bound by industry.

However, vast numbers of these problem-solving businesses are neglecting the hidden value of innovation – with an estimated nine out of ten eligible SMEs failing to claim for R&D tax relief.

Companies all over the UK are missing out on valuable R&D tax credits to the tune of thousands of pounds. Generally speaking, it’s the businesses you typically wouldn’t associate with R&D that are overlooking relief.

We don’t really do R&D

The very term ‘R&D’ often deters many firms from applying. The reality is, for those who work outside of the science and technology sectors, it’s a term that’s rarely used in day-to-day work – and therefore they assume they aren’t eligible.

Sometimes innovation is crystal clear. In other instances, it needs to be unearthed from within a business – like the North-East-based soil company that initially said “we don’t really do R&D” because its process of fine-tuning and treating soil for the different climates of clients was everyday work. So many businesses don’t understand what qualifies for R&D tax relief.

How much R&D tax relief can I claim?

The tax benefits of R&D relief are potentially huge. The average claim for an SME can generate upwards of£55,000 in tax benefit – a worthwhile venture in anyone’s book.

Nutritional and sports supplement specialist Cambridge Commodities was unaware that its innovations in health and wellbeing could generate a tax refund to nourish its whole business.

Ian Mitchell, Finance Director at Cambridge Commodities: The financial benefits of our claims have enabled us to invest in many different aspects of our business, including sales, recruitment and indeed further innovation. Our R&D claims have been fundamental to our growth plans for the future.

R&D relief enables a company to deduct an extra 130% of qualifying costs from its yearly profit, as well as the normal 100% deduction, to create a total 230% deduction. Qualifying R&D expenditure can include costs spent on staff, software, transformed/consumed materials and subcontractors.

Using R&D to grow your company

Last year, Haines Watts helped hundreds of clients all over the UK recoup an average £65,000 in cash refunds through R&D tax credits, and helped businesses save over £70 million in total. In turn, this has enabled business-owners to reinvest in innovation, future-proof their companies and, most importantly, ignite further growth.

What’s more, your R&D projects don’t need to have been successful – it’s the time and money invested in developing new processes, products or technology.

What qualifies for R&D relief?

If you’re unsure as whether you could qualify for tax relief, it is absolutely worth having a ten-minute phone call with an R&D specialist. The potential dividends could transform your business and help you realise your financial goals.

R&D Checklist

To claim, you must be able to say yes to the following:

  • “I am a UK limited company.”
  • “I can show that my project aimed to create an advance or appreciable improvement in my field.”
  • Either “I’ve carried out a project to research or develop a new process, product or service, or to improve an existing one in the last two years” or “I’ve provided solutions to my end clients which were not readily available to the market.”

If you have answered yes to the above then contact us today, to speak to a local Haines Watts office and explore your R&D tax claim.

Further reading

We’ve helped businesses across all sectors in making R&D claims. Read our R&D case studies below to see just some of the companies that we have helped.

How to claim R&D tax relief

There is a lot of confusion around claiming R&D tax credits, and many businesses miss out. Find out more here about how to claim R&D tax relief, and what a successful R&D claim could mean for your business.

Find and contact your local Haines Watts office

About the author

Jonathan Scott

Having joined Haines Watts as an apprentice, Jonathan quickly progressed through his AAT, ACA and CTA exams to become a Technical Tax Consultant. His success in specialist tax planning led to his promotion to Tax Partner in 2016, making him the youngest partner in the Haines Watts network to date. With a detailed understanding of tax planning, he provides tailored and proactive advice to clients to ensure they are structured in the most efficient way whether they are preparing for income tax returns; corporate re-organisations; company sales, mergers and acquisitions; inheritance tax or capital gains tax.

Jonathan has developed a particular specialism around research and development tax relief, advising clients how they can secure corporate tax credits through the development of innovative products and services.

Jonathan and his team have claimed back over £27m in R&D tax credits for innovative companies, as well as achieving a further £140m in total enhanced tax deduction. In this time, he’s worked with over 200 businesses, ranging from architects, digital agencies and engineers, to vets, manufacturers, and breweries.

Away from work, Jonathan – who was nominated for the Young Accountant of the Year in the 2015 North East Accountancy Awards – enjoys playing football and golf and walking his dog.

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