The ABC of R&D tax credits

Generous tax reliefs are available for companies that incur qualifying expenditure on eligible Research and Development (“R&D”) activities. The reliefs could take the form of an enhancement of the amount deemed to be spent for tax purposes, meaning more tax relief, or even an actual tax repayment.

Since the introduction of the R&D tax credit scheme in 2000, only 2% of British companies are actually claiming the relief. This equates to around £9 billion which is left on the table unclaimed each year.

One of the reasons is that most companies think they’re not eligible for the scheme because R&D tax credits are only for companies with R&D departments and “men in white coats”.

What exactly are “eligible activities” for R&D?

It’s as easy as ABC for R&D experts Jumpstart. Here are three companies that have recently received a substantial monetary return from the R&D tax system.

A is for Apps. Companies writing software for applications on mobile phones are eligible when they:

1. Make substantial improvements to existing products (where those improvements relate to the performance or capability of the product rather than its functionality); or
2. Incorporate new or untested technology into products, where experimentation is required to select the best implementation route; or
3. Make existing products work on new platforms (e.g. making an iPhone game or app work on an Android device), where this involves overcoming technical problems that haven’t been solved before; or
4. Work to create games engines or application frameworks where these represent a measurable and objective improvement over existing systems; or
5. Overcome bugs or limitations in existing technology; or
6. Test new technology where there is little information on their usage in the public domain.

B is for Blind Manufacturers. Textile companies are often eligible for R&D tax relief as they regularly attempt to overcome technical or manufacturing problems in a variety of areas such as:

1. Attempting to increase the abrasion resistance of a material; or
2. Improving chlorine stability (in swim suits, for example); or
3. Changing the blending ratio of a material to try to achieve increased strength or other desired physical properties; or
4. Attaining a higher stability e.g. maintaining colour or water resistance after a set number of machine wash cycles; or
5. Development of weaving processes for the production of a material with a new composition.

C is for Cake Manufacturers. Or other food manufacturing businesses that regularly work on new projects (often because of changes to legislation, consumer trends and specialist dietary requirements), such as:

1. Eliminating allergens and food additives;
2. Extending the shelf life of goods;
3. Product development for specialist dietary requirements (Low salt, sugar etc.);
4. Resolving technical problems with production processes (e.g. seasonal variation in product quality);
5. Retaining the same look, taste and texture after changing ingredients/ raw materials; or
6. Developing new processing methods after the introduction of new equipment.

D is for Do We Need to Say More? We could exhaust the alphabet many times over!

How can Jumpstart help?

Jumpstart are specialists on R&D tax credits, 100% focussed on helping companies make successful claims.

Jumpstart’s analysts derive from many scientific backgrounds enabling them to identify eligible activity that is often hidden in the daily routines of a company’s production and processes, and then translates what can be exceptionally technical detail into meaningful reports that are consistent with HMRC’s R&D guidelines.

Working together with Cassons, Jumpstart seeks to find and maximise a company’s R&D eligibility while Cassons utilise the tax benefits for their clients. Jumpstart always seek to complement not to compete.

Jumpstart has consistently found R&D eligibility in companies’ processes where the R&D legislation did not seem to be relevant.

So if you are a manufacturer and your industry sector starts with a letter of the alphabet then Jumpstart your cash flow now! See us at www.jumpstartuk.co.uk   Alternatively you can begin your conversation with Cassons chartered accountants on 0845 337 9409.