Could you get R&D tax credit?

Think only scientists and technology companies qualify for Research and Development (R&D) Tax Credits? Then think again!

Zooming up and down the country filming sporting action sounds like a dream job for any fan. But for Richard Jackson, founder of CheersMate Productions, the challenge of getting the perfect football, rugby or school sports shot was the lack of height and the British weather.

“We used to stand on top of a Land Rover Discovery or carry large steps with us but we still had issues with height and the rain,” says Richard. “It would take time to put plastic covers over the cameras and plugs and I just thought there must be an easier way of doing this. We needed height and rain protection. I looked into remote control cars and talked to people who worked with them.”

The result was the wireless Hi-Mate Tripod – a waterproof telescopic tripod operated remotely. “The work we did on the camera solved a problem. It was what we needed, it made sense for the business,” adds Richard. “I never thought of it as being research and development.”

Innovation

However, after receiving advice from specialist firm Breakthrough Group he discovered that he was carrying out innovative, unique work and was therefore eligible for HMRC’s R&D Tax Credits scheme.

The company claimed for an £18,000 cash rebate for its development work, re-investing it into further camera innovation. Their experience of the R&D scheme is exactly what the Government hoped for when it launched in 2000. It wanted to reward UK SMEs for investing in innovation and using their reclaimed funds to drive further new initiatives and hire staff.

They must be limited companies with less than 500 staff, eligible for corporation tax and with a turnover of under €100 million to be eligible.

How the scheme works

According to the HMRC to get R&D relief a company needs to explain how a self-funded project looked for an advance in science and technology in their industry and overcame uncertainty. The project must not be easily worked out by a professional and must research or develop a new process, product or service or improve on an existing one. It doesn’t even have to be a success to claim.

“Whatever you’ve done must be hard for other professionals to do. You must be advancing knowledge, capability and solving a problem in your sector,” explains Brady Last, managing director of Breakthrough. “When you start out the solution to the project must be unknown. You can’t build a new piece of software and know from the outset exactly how to do it. That’s not R&D. That uncertainty of how to do something must be present.”

From money to beer

Other examples of companies with eligible projects include Eris FX, which developed a real-time customer-facing platform allowing its clients to see and deal on streaming currency data, and Thornbridge Brewery, which used wild yeast and fruit to produce uniquely flavoured beers.

“We’ve been claiming regularly since 2014 and putting the cash back into refining the platform for new markets,” says Eris FX chief executive Helen Scott.

SMEs can claim up to 33p of every £1 spent on their R&D projects such as salary payments to staff or subcontractors, utility bills and cost of materials. They either receive a cash payment or more often a corporate tax reduction with the average claim coming to £53,876 in 2016-171.

HMRC aims to process the claims – which can be carried back two financial years –within 28 days.

Lack of awareness

Despite these rewards, according to tax specialist Catax, only 37% of SMEs have ever claimed R&D relief2.

“It is either not known about or misunderstood in the SME marketplace,” says Martin Brown, chief executive of business advisors Elephants Child. “An SME’s notion of what R&D is tends to be different from the Government’s definition.”

Brady agrees that it can be difficult for companies to define what is and isn’t eligible. “Most of our clients are in manufacturing, construction, software development and agriculture/food technology. But if you are creating new processes or products in any sector then we should be talking to you,” she says. “This is something firms should be claiming. It is money which could help spur further innovation and growth.”


The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

1. https://forrestbrown.co.uk/news/hmrc-r-and-d-tax-credit-statistics-2018/

2. www.neechamber.co.uk/our-members/news/two-thirds-of-eligible-newcastle-firms-missing-out-on-valuable-rd-tax-credits

The opinions expressed by third parties are their own and are not necessarily shared by St. James’s Place Wealth Management.