Qualifying for R&D tax benefits
If you qualify, you could take advantage in one of two ways. First, if you are making profits, these can be reduced for tax purposes by 230% of your R&D expenditure. In effect, this means that you are making a corporation tax saving of £25 for every £100 spent on R&D. Secondly, if you are loss making, you can exchange this claim for enhanced R&D expenditure for cash – 14.5% of your R&D losses.
HMRC view various costs as being R&D expenditure, but in the vast majority of cases the main cost will be Staff Costs – probably one of, if not the, biggest cost of any business. So, the benefits soon start to become significant!
Briefly, R&D activities are those which seek to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of uncertainties.
So, if someone asks you to, or you are looking to, produce something and you don’t know immediately how to achieve that product or service, you may have the required uncertainties. Your work required to answer the question ‘can this be done?’ is the resolution to those uncertainties.
Finally, the resolution which you seek cannot be ‘readily deducible by a competent professional in that field’. In practice, you can read that as meaning that you can’t just ask someone how to do it. If they already know, then that cannot be R&D in the HMRC’s opinion.