Tax Guides

Advice from an R&D Expert

Advice from an R&D Expert

September 21, 2020

Bryn Richards is Ridgefield Consulting’s Innovation Funding Lead. His role is dedicated to supporting our business clients take things to the next level by helping them secure funding to develop their innovative ideas. Bryn specialises in applications as well as business strategy for grants and R&D tax credits. He has gained his expertise through being an engineer for 15 years and having gone through the processes himself. He has an impressive history as a serial-entrepreneur and has also worked as Head of R&D at iHorizon.

Now he’s sharing his insight on the businesses that don’t – but should – be considering R&D tax credits seriously by challenging the top 3 most common misgivings.

1. R&D is for dreamers, not healthy businesses

R&D isn’t necessarily an esoteric activity. Research means only building new knowledge within your business. Development means building a new capability — usually by trying something you haven’t done before. It should be called “R or D”; it’s OK if you are just doing research or just development. Almost anytime you are using technology to improve your operations or your customer offering, it could potentially be R&D for tax purposes.

“R&D for tax purposes” is a wider net than most people think. We think of R&D as a rarefied, academic pursuit. Actually, the essence of R&D for tax purposes is taking risks. If you are working on something or spending money on something without a guaranteed return, then it might be R&D. Good businesses invest in the future. Unless you have a crystal ball, investing in the future is uncertain, and it could be R&D.

2. We’re not a charity case, so we don’t need a tax break

The government wants to incentivise your investment in your business, so please do them the courtesy of taking their money. The policy makers believe that these incentives will promote the success of your business and the UK economy as a whole. These incentives are designed to increase tax revenue in the long run, buy helping to grow the economy and create knowledge-intensive jobs.

Whether your business is large or small, profit-making or loss-making, there is probably an R&D tax scheme relevant to you. There are even creative industries tax reliefs for product development efforts that link to art and culture. Don’t write yourself off before speaking to an advisor.

3. It’s not worth getting into it
(We didn’t really spend much money / It wasn’t that impressive / We failed in the end)

HMRC values failure. If your R&D is a failure, the message from HMRC is, “Please take the tax break and try again.” Playing catch-up with your competition can potentially be R&D too. Most importantly, your R&D doesn’t need to be ground-breaking. It’s about moving your business forward technologically — Nobel prizes are strictly optional.

HMRC want to make this easy, so that any small activity is worth claiming for. There is a general principle in R&D tax that the amount of evidence HMRC can ask for (to justify a tax claim) is commensurate with the company’s own record-keeping for normal day-to-day business. This means that you don’t have to do extra work to demonstrate that you are conducting R&D. You do need to show HMRC how the nature of your R&D work fits with the tax code, but don’t worry, Ridgefield Consulting are experts in R&D tax code.

If you’d like to speak to Bryn yourself and pick his brains, please use the contact form below. The first consultation is always free of charge without obligation. 

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