Which Industries Benefit The Most From R&D Tax Credits?

Where R&D Tax Credit claims are most common

During recent years, awareness and uptake of the R&D Tax Credits scheme is grown as more and more companies realise the importance of innovation. Alongside the Patent Box which was unveiled in 2013, these schemes have signified government’s commitment to supporting business innovation in allowing the UK to compete globally. Indeed this couldn’t be more important right now, what with the chaos of COVID-19 and continued Brexit uncertainty.

The R&D Tax Credits scheme is open to any UK company in any sector. However, there are certain sectors for whom the relief is particularly suited. Here we look at some of them.

Food and drink

The scope for projects in the food and drinks industry that would attract an R&D Tax Credit claim is huge, but unfortunately way too many businesses are missing out. A possible reason for this is that although food and drink companies innovate all the time, they may not realise they’re actually doing it. For example, launching a new flavour of drink might just seem like a day-to-day function of the business, when in fact it’s a key piece of research and development that could well be the basis of a claim.

Other R&D in the industry may involve changing ingredients so that a food or drink is healthier whilst still tasting the same, or changing its colour. Other ingredients might need to be added, plus of course the final product will still need to be tested and marketed, again requiring R&D.

If this sounds familiar in your company, make sure you read up more on the following R&D Tax Credits page to find out more.

Science and engineering

This is perhaps an area where R&D is a little more obvious, and where the largest R&D tax relief claims tend to be.

Innovative technological and scientific advancement is in the very fabric of companies working in this sector. They spend a huge amount of time, money and effort in overcoming challenges and uncertainty, making them ideal territory for R&D Tax Credits.

Gaining a handy cash injection from R&D Tax Credits can be especially important to engineering and science-based firms so they can offset the expense of testing and launching new materials and technologies.

Key examples in this sector include:

• Security systems and services
• Biotechnology firms
• Engineering and architectural firms
• Media and advertising agencies
• Public relations and communication firms
• Tax and bookkeeping consultancies

Software development

Again, software companies are a primary target for R&D Tax Credits and claims can be extremely valuable.

An important thing to remember here is that HMRC is far more interested in what the technology or scientific ‘journey of discovery’ was, rather than the finished product. For example, simply creating a piece of software that’s pretty much identical to another product already on the market is unlikely to qualify. However, if the integration of this new software into existing systems poses a significant amount of technical or scientific challenge, then R&D Tax Credits could well be on the cards. Ultimately - like all R&D projects - R&D Tax Credits can still be awarded if the end goal wasn’t achieved for some reason. It’s all about throwing time and money into tackling uncertainty.

Additionally, software development is an industry where a company may well place multiple R&D Tax Credit claims in quick succession. This makes record-keeping even more important, so keep notes of what issues your team faced and what steps were taken in resolving challenges. By having all your costs and information to hand, you’ll find it far easier when putting together your claim and increasing your chances of success.

Not sure where to start or worried that your record keeping isn’t great? Myriad Associates (the R&D tax experts behind Tax Cloud) are here to help. Feel free to get in touch for an informal chat or to get the ball rolling on a claim.

Oh and while we’re on the subject - does your software company happen to produce video games? There’s additional tax relief available here too, in the form of Video Games Tax Relief.

Manufacturing

The fact that the manufacturing sector is a heavy claimant of R&D Tax Credits will again come as no surprise. It is after all a fast-paced, innovative sector where the creation and upgrade of products, materials and processes is virtually a daily occurrence. However, like in other sectors there are still a large number of eligible projects going unclaimed, or if claims are made they aren’t necessarily maximised (again we can assist with this).

Companies in the manufacturing sector will primarily spend their time and money coming up with new product ideas, creating prototypes, testing and trialling before marketing to the public. These are all activities which involve a certain amount of technological and/or scientific uncertainty, which is what makes them ideal for attracting R&D tax relief. Again, even if a manufacturing company simply makes a notable upgrade to an existing product or service, HMRC is still likely to accept a claim.

The thing is here that manufacturing particularly is a sector which is constantly evolving. This can make claiming R&D Tax Credits accurately a bit of a minefield, and over-claiming or under-claiming is all too easy. This is why we strongly recommend you contact us and discuss your manufacturing projects with one of our R&D tax specialists. We will be able to help you tease out the exact types of work and costs that can be included, many of which we guarantee you won’t have realised are eligible.

Has your company undertaken an innovative scientific or technological project recently?

Then don’t miss out on a lucrative pay-out courtesy of R&D Tax Credits. To find out more about this very generous tax relief and how to get your claim started, simply contact our expert team on 0207 118 6045. Alternatively, try out our Tax Cloud portal for businesses to make a great value, fully guided, R&D Tax Credits claim that’s backed by the Myriad Associates team.

Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud