R&D tax credits are a fantastic opportunity that rewards UK businesses for their innovation, but with so much misinformation floating around online, this government-led scheme can seem confusing and therefore is often under-utilised. With over 20 years of experience, Kirby and Haslam have the expertise to separate facts from fiction. We have broken down the most common R&D Tax Credit myths to help you feel confident in your claim.
Myth 1: R&D Tax Credits are only for innovation within the scientific sector.
Whilst basic scientific research is a clear example of an eligible project, this government scheme is focused on encouraging applied science across all sectors. Applied science means addressing an issue within a business by using known scientific or technical principles. For your business, this could mean researching how you could streamline your business operations or developing and testing a new product.
Myth 2: You can only claim on completed projects.
This myth is entirely false. No matter the stage of completion, your R&D project may still be submitted for an R&D Tax Credit claim. Whether you’ve had to put your project on hold or completely abort it, your existing R&D efforts can still be rewarded.
Myth 3: You can only claim if your project is successful.
This government scheme was introduced with the sole purpose of encouraging innovation, whether it is successful or not. HMRC understands that there is always some risk in conducting innovative research, and they do not penalise businesses for this. So even if your project didn’t produce the results you were looking for, you can still claim R&D Tax Credits for your efforts.
Myth 4: You must create a completely new product or process to be eligible.
This is a common misconception that stems from outdated information. Previously, a business would have to discover or create a completely new product or process to be eligible for R&D Tax Credits. However, the government came to understand that this was an unreasonable expectation. HMRC now states, “Your project may research or develop a new process, product or service or improve on an existing one.” It is those last five words that really matter here. Improving upon a pre-existing process, product, or service is something many UK businesses are already doing and could be eligible to claim R&D Tax Credits for.
Myth 5: You can only claim for the current financial year.
When claiming R&D Tax Credits for the first time, you can claim for your last two financial periods. This means that if your current financial year is coming to an end soon, it’s best to claim before potentially losing out on a year’s worth of a claim. With this in mind, make sure to track all of the R&D expenses your business incurs and claim before the two-year deadline passes.