Welcome to the 1st ever issue of the Green Business Journal. I thought I would take the opportunity to introduce, or in some cases perhaps reconnect, you to the wonderful world of Research and Development Tax Relief. Then I’d like to introduce you to a few businesses that we have been working with to support them with claims for relevant projects, to give you a feel for what you might be missing out on.
Has it really been around that long?
Research and Development Tax Relief has been available to small and medium-sized companies since 2000 and was the brainchild of Gordon Brown and Tony Blair. It has been supported and improved upon by every Government since. Large companies have been able to claim since 2001.
The aim of the tax relief is to reward those SME companies that are doing interesting things with Science or Technology, with either a tax relief against profits or a repayable tax credit for surrenderable losses. For Large companies, or SMEs that have received funding for their project, the tax relief comes in the form of what is called an “Above the Line Credit” or Research and Development Expenditure Credit (RDEC). RDEC provides a taxable income that can either then be deducted from the tax charge or if there is insufficient liability can be reimbursed to the business subject to a number of qualifying criteria.
The rate of tax relief for SMEs is 24.7% of the eligible expenditure and the rate of the repayable tax credit is 33.35% of the eligible expenditure. The rate for RDEC is 13% of the eligible expenditure, which after being taxed equates to 10.53% of the eligible expenditure.
What is eligible expenditure?
Well it falls into a number of categories for eligible projects:
Staff Costs – payments to employees and workers for salaries, wages, bonuses, Employers NI and Pension Contributions and reimbursed out of pocket expenses, for both direct R&D and activities that support R&D.
Subcontractor costs (SMEs only) – payments to subcontractors on a time and materials basis for work performed to assist with the project. This is important, I’ll explain in a later article!
Externally Provided Workers – payments to agencies or other companies providing workers to operate at the behest of the R&D business.
Materials Consumed – the cost of materials consumed in the R&D process, such that they either need to be scrapped or cannot be used again inside a working prototype that is not sold by the business.
Utility Costs – Light, heat and water
Payments to Universities and Prescribed Bodies – Any payment for support in an R&D Project to a place of learning or to a hospital that is free at the point of delivery.
Software – the costs of software purchased (or developed, where the development is not itself R&D) to support the R&D Process.
Payments to Clinical Trial Volunteers – perhaps not so relevant.
Is my project eligible
This is the real crunch question. The Legislation states
R&D for tax purposes takes place when a project seeks to achieve an advance in science or technology. The activities that directly contribute to achieving this advance in science or technology through the resolution of scientific or technological uncertainty are R&D. Certain qualifying indirect activities related to the project are also R&D.
An advance in science or technology means an advance in overall knowledge or capability in a field of science or technology (not a company’s own state of knowledge or capability alone). This includes the adaptation of knowledge or capability from another field of science or technology in order to make such an advance where this adaptation was not readily deducible. An advance in science or technology may have tangible consequences (such as a new or more efficient cleaning product, or a process which generates less waste) or more intangible outcomes (new knowledge or cost improvements, for example).
A project which seeks to, for example:
extend overall knowledge or capability in a field of science or technology; or
create a process, material, device, product or service which incorporates or represents an increase in overall knowledge or capability in a field of science or technology; or
make an appreciable improvement to an existing process, material, device, product or service through scientific or technological changes; or
use science or technology to duplicate the effect of an existing process, material, device, product or service in a new or appreciably improved way (e.g. a product that has exactly the same performance characteristics as existing models, but is built in a fundamentally different manner), will therefore be R&D.
Got it? The examples at the end certainly seem to explain it more than the narrative and it is these we will discuss with you.
The real challenge we always find when we talk to companies is identifying the scientific or technological challenges that they faced during their project. This is usually because we are getting involved after the fact. But it is these challenges and how you overcame them that will be the determining factor in whether you have an R&D project.
What can I do now to prepare for a claim?
The best thing you can do for yourself right now is to document your thoughts, your ideas, your failures and to a certain extent your successes, both that have happened in the past or for when you move forward with your project. Focus more on your failures than your successes! We have a very basic form, if you’d like a copy of it contact me through the website:
www.coodentaxconsulting.co.uk or contact me through LinkedIn https://www.linkedin.com/in/simonbulteel74cooden/ there aren’t too many Simon Bulteels!
Our successes with Green Champions
Tensei. We met Annabelle at the Business Show in 2015, Tensei have been developing technical papers from waste agricultural products, particularly straw. They have developed the treatment and manufacturing processes to produce these papers and now they have moved into developing pads for soft fruits that are currently being trialed by a leading supermarket. They are now looking at developing their own production plant to allow for the paper to be produced at scale.
OSET Bikes. OSET were one of our first clients, we’ve been working with them since 2014 and helped them to claim several hundred thousand pounds in R&D Tax Relief. They develop electric trials bikes (if you are of an age like me, think Kick Start and Peter Purves), they are one of the leading names in the industry and have initially developed children’s bikes that actually have a competitive advantage over the petrol versions. Oset have recently been involved in a KTP with Brighton University.
That’s just two of the companies we have worked with to date there are several more!
If the article has piqued your interest you really should explore your potential to claim. We offer a no obligation discovery call, we call it “Find out in Fifteen Minutes”. You can book a call at
In future articles, we’ll explore some of the pitfalls and opportunities that exist within the R&D Eco-System, touch on other funding opportunities and give you as much information as you can dare to wish for as you continue on your research and development journey.