Research and Development (R&D) tax relief is designed to support companies that invest in innovation and seek to make advances in science or technology. The scheme offers businesses the ability to invest in new technologies and scientific development in exchange for generous tax reliefs. However, not every project will qualify, and businesses should carefully consider whether their activities meet HMRC’s requirements before making a claim.
Only companies’ chargeable to UK Corporation Tax can qualify for R&D relief. In addition, the company must be undertaking a project that aims to achieve an advance in a field of science or technology.
For tax purposes, the requirements that must be met for R&D to qualify for relief include creating new processes, products or services, making appreciable improvements to existing ones and even using science and technology to duplicate existing processes in a new way. R&D activities can qualify for tax relief even if the project in question failed and both profitable and loss-making companies can benefit from making a claim.
The advance must go beyond simply improving processes or products for the business itself and should contribute to overall knowledge or capability in the relevant field. Since April 2023, mathematical advances can also qualify as scientific advances for R&D tax purposes.
Businesses should keep clear records of the uncertainties faced, the work undertaken to resolve them, and the successes and failures encountered during the project. Once eligibility has been established, the next step is to identify the qualifying expenditure that can be included in an R&D relief claim.
