It is a win-win situation for companies investing in Research and Development, not only will they improve efficiencies and advance their businesses, but they may well qualify for a valuable government incentive, at the same time!

You may have heard of Research & Development Tax Credits but assumed that they weren’t applicable to your business, but just the province of high tech companies carrying out advanced processes.

Not so. The definition of a qualifying activity is surprisingly broad and designed to encourage all sizes of companies to invest in innovation.

The reliefs give businesses an opportunity to claim back a proportion of their R&D expenditure as tax credits against Corporation Tax.

It is well worth investigating the possibilities for your own business as the average SME R & D Tax Credit claim in 2015-2016 claim was over £61,000, a considerable boost to any company’s finances.

The work must be part of a specific project to make an advance in science or technology, and must relate to your company’s trade - either an existing one, or one that you intend to start up based on the results of the R&D.

So a farmer improving his milking parlour, or a manufacturer developing new equipment or adapting some existing tech in a new way to over come a difficulty, may well qualify.

• looked for an advance in science and technology
• had to overcome uncertainty
• tried to overcome this uncertainty
• couldn’t be easily worked out by a professional in the field

Your project may research or develop a new process, product or service or improve on an existing one, but must aim to create an advance in the overall field, not just for your business. This means an advance can’t just be an existing technology that has been used for the first time in your sector.

You should show that the R&D needed research, testing and analysis to develop it and explain the work you did, this can be a simple description of the successes and failures you had during the project.

You can also show that the people working on your project are professionals in that field and get them to explain the uncertainties that have been resolved.

Working out whether your activities qualify is where the services of an R & D specialist come in, they will take an in depth look at your business and the project, or projects, you have undertaken and use their experience to assess the eligibility of your activities.

We are often asked, “Why hasn’t my account mentioned this to me, or helped me to make a claim?”

R & D Tax Credits are a rather specialised area, and while very large companies usually have specialist teams of accountants researching every area, most generalist accountants don’t have the in-depth knowledge to assess a claim.

We are often told that even when companies have made a claim, that on investigation, the specialist team were often able to increase the value of that claim.

Using the services of a R&D specialist, that just deals with this area of taxation will maximise, not only your claim, but your chances of benefitting from this genuine government incentive.

They have the knowledge and expertise to deal with HMRC on your behalf and the know-how to prepare your claim in the format most acceptable to HMRC. If required they are usually prepared to work alongside your existing accountants in order to your claim together.

There are different types of R&D relief depending on the size of your company and whether the project has been subcontracted to you or not.

You can claim SME R&D relief if you’re a SME with less than 500 staff and a turnover of less than €100m or a balance sheet total under €86m.

You may need to include linked companies and partnerships when you work out if you’re a SME.

SME R&D relief allows companies to deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction, or to claim a tax credit if the company is loss making.

Larger companies can claim the relief under a different scheme, the Research and Development Expenditure Credit, which replaces the relief previously available under the large company scheme.

The scheme is definitely working; the government’s own assessment indicates that for every £1 spent on R&D tax relief, up to £2.35 in R&D spend is stimulated.

So it seems that the formula of British inventiveness and the government tax incentives is creating a winning mix for British industry.