In terms of innovation in agriculture; if a company came to us after developing new fertiliser that can triple crop yield whilst reducing environmental damage by mitigating run off and leaching, we could help the company by separating the commercial aspects of the project from the activities that constitute R&D for tax purposes.
Claiming R&D for tax purposes can seem like a complex and confusing process, especially when it comes to defining what qualifies and what does not. This is where Kirby and Haslam can help you.
A project such as this would begin with feasibility and planning before moving to lab development. This would initially be small scale lab testing to assess fertiliser composition and its effects on basic plants and simple crops, before the commencement of controlled environment testing against target crops in various conditions and with different species. Small scale field trials would be the next stage after the lab trails have completed, which would then be progressed to large scale field trials as the final stage of development.
We help our clients match activities such as these to HMRC guidelines for qualifying expenditure. In this case the initial planning and the actual testing would be direct qualifying expenditure, as they work to directly overcome the advance. The testing methods employed do not need to be new in and off themselves, the knowledge created through such experimentation is what is important. However, if new testing methods were to be created for this project, the work to do this would also qualify (In fact, it may even be R&D in its own right).
We can also help the company identify where their innovation in agriculture and R&D for tax purposes ends. In this example, the R&D would end at the point the fertiliser is deemed a success or failure within its live environment. This is because what may appear feasible in lab testing may not bear out on a large scale, especially when it comes to assessing environmental impact.We would therefore eliminate any activities after this point, such as the marketing stage and any research into commercial viability as this does not serve to help overcome the uncertainty.
Within the R&D for tax purposes of the project, we would look to identify all qualifying expenditure, including costs incurred through indirect qualifying activities. These could include: initial feasibility studies (such as to identify the required qualities of the eventual fertiliser), the process of recruiting specialist plant scientists, any maintenance or administration costs incurred in support of the testing process, training to enable staff to assist with testing, or work to compile findings of testing.
We work with companies to identify the best competent professionals within their business to support the claim, so that we can utilise their expertise to define precise uncertainties. Once this has been completed we can look to split up the larger project into smaller R&D sub-projects, related to each uncertainty. In this example in terms of innovation for agriculture, scientific or technological uncertainties could include: the scientific possibility of identifying a fertiliser composition that promotes increased yield, the scientific possibility of identifying a fertiliser composition that limits chemicals that could be damaging to the environment, the technological feasibility of reducing run off and leaching of chosen fertiliser components, the scientific possibility of creating new knowledge around effect on different crop species.
We can then relay the above information into a report and ensuring that there is sufficient documentary evidence to support the project narrative (such as research notes, meeting minutes, photographs, emails, or project plans). The final stage of the claim construction involves matching the financial expenditure to the qualifying activities and computing the precise claim value.
The company will then be able to review and sign off on their claim prior to submission.
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