Cottons Group
Research and development tax incentives – what you need to know
If your business invests in developing new products, processes or technologies, you may be overlooking two valuable tax incentives: Research and Development (R&D) tax relief and the Patent Box. While these schemes can signifi cantly reduce your tax
bill, HMRC has tightened the rules in recent months and years, especially for projects involving overseas teams. T ey are now paying closer attention to the accuracy of all claims. In simple terms, this means you must demonstrate
that your research genuinely pushes the boundaries of science or technology, maintain clear documentation, and work with reputable advisers to ensure compliance with the rules. By doing so, you can still benefi t from these powerful reliefs and keep your company at the forefront of innovation. T ese reliefs are eff ectively funded grants for innovation.
Any business that has applied for grants in the past knows the level of detail required to make a successful application.
Luke Prout Tax Partner Cottons Group
It may not come as a surprise that, historically, claims for R&D tax credits did not require the same level of infor- mation as a typical grant application. However, this has changed. More information is now required to support claims, ensuring taxpayers’ money is directed to the right places to fund innovation in the UK.
Which businesses qualify? Many companies can potentially qualify for R&D tax relief if they are taking a risk by trying to resolve scientifi c or technological uncertainties. In simpler terms, if you are seeking new and improved
ways to make or do things – beyond routine changes – and can show that the outcome was uncertain at the start, you may be eligible. Below is a summary of the types of projects and criteria
that typically make a business eligible: ■ Creating a new product with signifi cantly improved features or performance, or enhancing an existing product by overcoming technical hurdles.
■ Streamlining manufacturing steps, adopting cutting-edge technology in your workfl ow, or integrating new software in a way that goes beyond ordinary IT improvements.
■ Writing code to solve complex problems, building novel algorithms, or tackling challenging user-experience issues that require experimentation and testing.
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