R&D tax reliefs provide companies with the opportunity to claim generous tax savings for innovative activity. Those savings can take the form of a reduction in corporation tax or actual cash into your bank account, depending on your company’s circumstances. However, many companies miss out because they aren’t sure what kind of work they can claim for or how to go about making a claim. This is why we’ve teamed up with our long-term supporters, Shorts Chartered Accountants, to raise awareness of their Radius R&D tax service.
De-mystifying R&D tax reliefs
The potential savings that you can make through claiming R&D tax reliefs are worth paying attention to. For a business developing new or improved software that seeks to make ‘appreciable’ improvements in the field, around £25,000 can be saved in corporation tax for every £100,000 spent innovating. The Q&As below are from the Shorts Radius service and give an idea of the sorts of activity that could be claimed for:
Are you paying technical people to solve technical problems?
- Resolving technical uncertainties is a strong indicator of R&D activity.
Do you have to develop new platforms, software, APIs or security protocols?
- If these involve increasing the current state of knowledge and are not obvious, then it is likely this would qualify as an R&D project.
Would what you are developing be considered innovative in the sector you work in?
- If the answer is yes, then this is another strong indicator of R&D activity.
What about new website or app development, is this R&D?
- Generally, not if the development is using existing knowledge and technologies. However there often might be something complex or innovative in the back-end systems behind these and that might be where the R&D activity is.
What if all I am doing is applying my knowledge to deliver a solution?
- If what you are doing would be recognised by your peers in the sector as a non-trivial advance or appreciable improvement to the baseline of technology you are developing, then that is likely to be R&D.
I am developing the software for a customer; can I still claim?
- As long as there is some risk, i.e. I will only be paid if I deliver the project or solution, then yes you could still be able to claim.
I don’t pay myself a wage and use contractors, can I still claim?
- Possibly, but this is where it gets complicated and specialist advice from an R&D expert is recommended
The kinds of development activities that are likely to qualify in the digital/ software field include:
- Developing new operating systems or languages
- Creating new algorithms
- Hardware / Software conflicts & system Integrations
- Appreciably improving systems
- Beta type customer / internal trials
- Management input to project meetings
- Duplicating an existing process or technology in a new way
- Process improvements with system uncertainty
- New encryption or security techniques
- Scale up in trials
- Creating new search engines using new methods
About Shorts Radius and Sheffield Digital
Radius is part of Shorts Chartered Accountants, who have supported Sheffield Digital since we first set up. Their team of dedicated R&D specialists includes an ex-HMRC R&D Inspector.
Scott Burkinshaw, Tax Partner and Head of Radius, explains, “We believe that the process for preparing R&D claims should be straightforward and unburdening. We use a simple three-step process so our specialists are able to quickly and concisely assess eligibility and complete claims. Over recent years, Shorts’ Radius have helped many businesses claim millions of pounds of R&D tax reliefs and we want to work with Sheffield Digital to help raise awareness of how the digital industry can prosper and benefit from the support that is available.”
How to find out more
Having an initial conversation with the Radius team is the best way to find out more about how the process works and whether you would have an eligible claim. To set that up, simply email firstname.lastname@example.org and we’ll put you in touch.