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Myth busting: the top four R&D tax relief misconceptions dispelled

09 July 2017

A large number of companies in the UK qualify for refunds on their tax due to their research and development (R&D) activity. There is a popular misconception that this relates mainly to pharmaceutical or technology businesses but it also applies to hundreds of companies working in the food processing industry. 

Each year the Government sets aside billions of pounds in order to support and encourage innovation and efficient business practice. However, the vast majority of this funding goes unclaimed due to a lack of knowledge and/or apathy on the part of professional advisers when it comes to carrying out a successful, fully legitimate claim. 

HMRC's definitions for what constitutes 'research' and 'development' are very broad but many companies do not know what they can claim for, or if they can claim at all, so are potentially missing out on thousands of pounds.
 
Most good accountants are aware of this but unfortunately a large number do not get involved or do not fully understand the process to make an effective claim. To assist businesses take advantage of these legitimate opportunities, there are now a small number of specialist advisers.
 
The top four misconceptions are:

1. 'We do not qualify' Many organisations do not view their activity as R&D, because it forms part of their day-to-day work. In reality, the vast majority of R&D tax relief claims relate to actual commercial development, meaning the ongoing activity of continual improvement of products and processes to improve quality, or efficiency, will qualify.
 
2. 'The system is too complicated' Many companies feel overwhelmed by the complex definition of R&D, which underpins the relief, and simply do not have the resources available to get up to speed on this specialist area of taxation.
 
3. 'Tax relief involves aggressive tax planning' This is an extremely common misconception that is often raised in relation to R&D tax relief. In reality, there is a huge distinction between R&D, which is a Government led incentive, and tax planning, where structures are used to acquire a favourable tax position.
 
4. 'The relief is going to be scrapped' Successive Governments from different political parties have increased the claimable percentage over a 16-year period from 150% - 230% (in 2016). This means that the incentives are not only here to stay, but have improved in generosity over the years. 

The message is clear. There is money to be had for those undertaking commercial development work. 
 
For more advice about claiming R&D tax relief call Clerik: 020 7112 8779


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