The Top 4 Common Misconceptions about R&D Tax Relief Eligibility

While the term ‘research and development’ brings to mind rocket ships and Terminators, companies in all kinds of sectors are unwittingly conducting R&D every day and not claiming tax relief for it. Dispelling some of the commonly held misconceptions about what’s eligible and what’s not opens up a wealth of new opportunities for engineering companies to benefit from the UK Government’s R&D tax relief scheme.

[pif_accordion] [pif_spoiler title="Only scientists and people working in laboratories do R&D." style="fancy"] Not true. The term ‘research and development’ might have connotations of white coats and laboratories, but, as HMRC’s guidelines for the scheme prove, the scope for eligibility can extend to any company that’s aiming to advance knowledge in their field of expertise through the resolution of a technological uncertainty. So, no matter what industry or sector you work in, there’s a chance you’re involved in qualifying R&D. At Jumpstart, we’ve made successful R&D tax relief claims for engineering sub-sectors as diverse as construction, waste processing, medical devices and contract OEMs.

“We had read the guidance on the legislation but it was not until Jumpstart came to work with us, that we had our eyes opened. They altered our mindset with their technical approach, and gave us a different understanding on what qualifies for R&D. We had been viewing a claim as something unique and groundbreaking within the field as a whole, but in fact we quickly came to realise that it was about the technical advances we had been making.”

Daniel Orwin, Group Finance Accountant, David Brown Gears [/pif_spoiler]

[pif_spoiler title="We’re working on a new version of an existing product. Surely only the original research would be eligible? " style="fancy"] False. It doesn’t matter if a similar product or service already exists. The assumption is that only what’s already in the public domain provides the starting point for the research. So if you develop a different version of an existing product without having had access to existing methods or designs, and can prove that your endeavour is going to enhance knowledge and capability within your field, then it’s likely you could claim for R&D tax relief. [/pif_spoiler] [pif_spoiler title=" Our project failed, so of course we can’t claim for R&D tax relief." style="fancy"] Wrong. A failed project is often a good indicator that R&D is taking place. HMRC’s definition states that the “resolution of scientific or technological uncertainty” is a key factor in identifying R&D projects. Whenever there’s an element of uncertainty around whether or not something can be done, failure is going to be one of the possible outcomes. So if a particular activity has proved fruitless, don’t despair. It may well still be a candidate for R&D tax relief![/pif_spoiler]

[pif_spoiler title="We’re already claiming, so we know what we’re eligible to receive" style="fancy"] Think again. As companies innovate and evolve, so do their R&D capabilities and eligible costs. You need to continually check that you’re claiming for all your eligible R&D costs, not just some of them. Working alongside R&D tax relief experts like Jumpstart ensures no stone is left unturned and that each and every claim is maximised in accordance with HMRC’s latest interpretation of the guidelines.

“If everyone made use of the services of Jumpstart, then the UK economy… would be so much healthier. I urge all to follow us, and get what is, after all, rightfully theirs.”

Jim McColl, OBEClyde Blowers Capital [/pif_spoiler]
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Isn’t it about time you reviewed your eligible activity and secured your share of the estimated £16.3bn of unclaimed tax relief since the start of the scheme?

Do you have any engineering R&D tax relief case studies, we would like to hear how you found it.