A recent report in The Telegraph says businesses across the UK are losing out on billions by not claiming for R&D Tax credits.

If you are carrying out any research and development (R&D) in your business, you should be making the most of the government scheme to claim tax relief on eligible R&D spend.

In this article I’ll be highlighting the things you need to know before putting together a claim. First let’s take a look at exactly what R&D Tax credits are and what type of business can make use of the scheme.

R&D Tax Credits in a nutshell

‘R&D Tax Credits’ is the umbrella term for tax relief available to businesses that invest in developing products, services, software or processes. The key is that the R&D activities seek to achieve an advance in technology. This can be creating new products, services or processes or modifying existing ones.

Who can claim R&D Tax Relief?

Any business that meets the eligibility criteria can claim, regardless of sector. It is a common misconception that only businesses in the technology and engineering sectors can claim. This isn’t true. Eligibility criteria simply asks that:

• Your business is a Limited Company and is subject to Corporation Tax
• Your business has carried out qualifying research and development activities
• Your business has actually spent money on these projects

For the main scheme, your business also needs to be a small or medium-sized enterprise (have fewer than 500 employees), and either, a turnover of less than €100 million, or gross assets of less than €86 million. If your company has more than 500 employees, or is in partnership with another company, other rules apply under the Large Company Scheme.

The information you’ll need when making an R&D tax claim

Putting the right information together when you submit your claim to HMRC for R&D Tax Relief could make all the difference and ensure you maximise your tax break.

1. Technical information

Part of the process of making a claim involves writing what is called a ‘technical narrative’. This part is really important and often the bit that companies fall down on. The technical narrative explains your project, including the features and challenges involved.

HMRC will want to see that you have looked for an advance in science or technology and sought to achieve this aim. You will need to show that your challenge could not easily be worked out by a professional in the field and that you had to overcome scientific or technological uncertainty.

The narrative needs to be written from a technical perspective, not a project management one. It needs to be technically complex and show how resource intensive your activities were. Ideally your R&D technical narrative should be 2-5 pages long.

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2. Details of your R&D spend

This is essentially all of the financial information related to your R&D project. You will need to know what costs can be included in your R&D Tax claim as not all costs are eligible. Costs that can be claimed are known as ‘qualifying expenditures.’ You should be able to claim for:

• Direct staff costs
• Subcontractor costs
• Externally provided worker costs
• Software costs
• Utility costs
• Payments to clinical trial participants
• Contributions to independent research
• Prototypes

There are a lot of costs you can’t claim for, even though they may have been incurred as a direct result of your R&D project.

Items you can’t claim for include travel and subsistence, recruitment agency fees, postage, stationery and freight, computer costs, capital expenditure, rent and business rates, telephone and broadband charges, server costs, professional fees and Patent attorney fees. Ideally, consult with your accountant or an R&D tax specialist to clarify the costs you can claim for.

You will need to match finances to the data in the technical narrative. If you don’t do this HMRC will almost certainly query your claim.

3. Information about employees that have worked on the projects

Qualifying staff costs fall into two categories (direct and indirect). Let’s take a brief look at what this means. Direct staff expenditure refers to the costs of directly employed staff who are engaged in carrying out R&D activities.

This includes gross wages, Employer’s National Insurance Contributions and pension costs. The staff have to be company employees under a contract of employment. Directors wages can also be included if they are working on the R&D project.

As employees are unlikely to be spending all of their time on R&D, you will need to maintain timesheets or similar records to present with your claim to HMRC.

Indirect staff costs are those where employees are engaged in wholly or partly supporting those engaged directly in R&D activities. This includes clerical support and administration staff, maintenance engineers, security staff and training staff.

How long will it take for HMRC to approve?

Typically, once you’ve submitted an R&D Tax claim to HMRC, it takes around 6-8 weeks to get approved, or longer if the tax office has queries. Once approved you’ll receive either a tax rebate or a Corporation Tax deduction.

Don’t delay, start your claim today. Speak to an R&D tax specialist to find out if your project is eligible.

Almost 9 in 10 finance companies could be eligible for Research and Development (R&D) tax relief on new products and services but only 41% of them have ever claimed, Catax has revealed.

Businesses in the finance sector are missing out on millions of pounds even though 89% of them have developed new products or business process in the last two years, spending an average of £351,594 on these innovations, research shows.

This means these companies are in line for valuable R&D tax relief that the government provides to encourage innovation.

But despite three quarters (77%) of finance firms being aware of R&D tax relief, less than half report ever claiming it, the Catax study shows. This is either because they don’t think they qualify or they incorrectly believe that it is expensive and time consuming and ‘would not know where to start’.

A quarter of finance businesses do not realise they can claim R&D tax relief if they develop a new product or service while more than a third of the business managers said they ‘did not know’ if their firm had ever made a claim, according to the Censuswide survey.

The national average for the number of firms that have ever claimed is 36.8%, which puts finance companies ahead of many other sectors despite the fact they are missing out on a huge number of claims.

Executives believed the average value of an R&D tax relief claim in the first year to be just £27,254 when the true figure is almost double that, at £49,000 for firms in all sectors nationwide. R&D doesn’t even have to have been successful to qualify and claims can be backdated at least two years.

Catax CEO, Mark Tighe, commented: “The finance sector is missing out on tens of millions of pounds in R&D tax relief each year – despite claiming to be experts in finance. Many companies still think that R&D is all about science laboratories and test tubes and simply do not relate it to their own innovations.

“We need to get away from this way of thinking. The vast majority of finance companies invest hundreds of thousands each year on developing new products and services which would make them eligible and yet less than half are actually claiming.

“Finance executives looking to improve margins and efficiencies must take a proper look at their R&D tax relief entitlements. Most good R&D tax relief specialists will work on a commission basis so concerns over costs should be dismissed.

“New products and services do not even have to have been successful to quality for R&D tax relief because it is all about encouraging innovation.”

R&D tax credits can help to reduce a limited company’s corporation tax bill or be claimed as a cash sum reimbursement from the HMRC. R&D tax relief only applies to those businesses that are liable for corporation tax, including businesses making a loss.

(Source: Catax)

Many dedicated cryptocurrency and blockchain companies will be ‘R&D by default’, says specialist tax relief firm, Catax. They could therefore be eligible for much more relief than a standard business, meaning US and UK firms could be in line for hundreds of millions in tax relief. Traditional firms investigating blockchain technology and the commercial potential of cryptocurrencies will also be eligible for R&D tax relief.

Catax estimates that as much as 82% of the work carried out by dedicated crypto firms will be eligible for R&D tax relief given its ‘ingrained innovation’. This compares to roughly 35% with a traditional company performing R&D.

In many cases, the enhanced R&D eligibility is because the majority of the workforce will be focused on developing this technology and adapting it to a specific sector or use case.

Rather than channel-specific, the R&D being performed at these companies is company-wide.

But traditional firms investigating the use of these new technologies for their specific sectors will also be eligible.

Firms in countless sectors are currently weighing up the benefits of trading in cryptocurrency amid the recent $12,000 valuation of Bitcoin, and the acknowledged efficiencies of the blockchain. This amounts to time and money ‘developing a new product or business process’ — the basic requirement for an R&D tax claim.

UK firms have already raised a total of £52.8m ($71m)¹ in ICOs, while the total raised in the US has reached more than $1.1bn (£820m). In the United States, firms are allowed to claim relief under the R&S Tax Credit system.

TokenData has revealed 90% of funds raised through ICOs has occurred in 2017, which means R&D tax relief for UK firms will fall well within the two year deadline for claiming.

Mark Tighe, CEO, Catax, commented: “Each day we’re seeing more and more dedicated blockchain and crypto companies emerge, while a growing number of traditional firms are also allocating significant resource into how they could integrate this technology into their own operations and sector.

“Within the crypto field, innovation is often company-wide rather than channel-specific and so the eligible expenditure is considerably higher than with traditional firms carrying out Research and Development.

“While you can’t claim R&D on Bitcoin and the blockchain itself, the potential for relief comes when companies evolve them or create new versions altogether. An example might be creating bespoke ‘sidechains’ for your sector that run alongside the blockchain, or a new digital currency altogether.”

(Source: Catax)

Among the thousands of individuals, charities and businesses’ making donations towards hurricane Harvey relief, and in the wake of another pending hurricane in the Caribbean, KPMG has teamed with brand ambassador Stacy Lewis this weekend to make a combined donation of $390,000 to support Hurricane Harvey relief efforts. This follows Lewis' win at the Cambia Portland Classic where she donated 100% of her tournament winnings.

Stacy Lewis was raised and currently resides in the Houston, TX area and Lewis' husband, Gerrod Chadwell, is Head Golf Coach for the University of Houston Women's Golf Team. Stacy dedicated her play on this week's LPGA Tour tournament to relief efforts, which KPMG matched. Asked what the week has taught her, Stacy reflected: "Being more appreciative. It definitely puts things into perspective."

This win marks Stacy's 12th on the LPGA Tour and first victory since 2014. In addition to KPMG's donation to relief efforts, each time a KPMG Brand Ambassador wins on Tour, KPMG makes a donation of books and refurbishes a local library as part of KPMG's Family for Literacy (KFFL) initiative. To honor this special win by Stacy, KPMG will double the typical donation with 10,000 new books to be provided to children and local KPMG volunteers will refurbish two libraries in the Houston area.

KPMG US Chairman and CEO Lynne Doughtie said: "In times like this, coming together to support one another matters the most. We are touched by the generosity displayed by Stacy, and so many across the country, to help those impacted by Hurricane Harvey."

In addition, KPMG has pledged to match partner and employee contributions up to $400,000 to the KPMG Disaster Relief Fund to provide Hurricane Harvey relief.

(Source: KPMG LLP)