Even though your client have already claim R&D Tax Credits, there’s every possibility they could be sat on ‘secret’ R&D. But what do we mean by ‘secret’ R&D? Well, we often come across clients that have developed or built a product, process or service specifically for themselves without recognising that what they are doing is research and development. They are so focused on just ‘doing’ the work they do, they don’t recognise the steps they are taking. It’s only when you start thinking in a certain way that you begin to recognise that you are sat on products, service and processes that you could claim R&D Tax Relief for.
With that in mind, we want to share some examples, to give you an idea of the types of activity and situations in which secret R&D occurs. You could put a big smile on your clients face with these beauties.
ARE YOUR CLIENTS SAT ON SECRET R&D?
Secret R&D can manifest in many different ways, through things like:
Investing in technology and integrating it, to improve efficiency
Developing specialist software to resolve inefficiencies in business processes
Developing new products to improve service delivery
Developing an existing service to improve customer experience
Developing new systems to improve business processes
Here are five real-life examples of businesses that had been sat on secret R&D ….
Business: SAAS Technology solutions Secret R&D: Business as Usual R&D Tax Refund: £7.5K Working with clients to deliver bespoke technology business solutions for a wide range of industries and business scenarios, this company delivers R&D qualifying projects pretty much every day. The business was so involved in the day-to-day, they didn’t recognise that they were delivering research and development, daily. The company had also invested significant resources into the development of their own technology solution, just seeing it as an internal project needed to improve their efficiency.
Working with a client they recently developed one of the UK's most advanced smart metering platforms leading to just over £7.5K of R&D tax credits.
Business: E-commerce Secret R&D: Resolving Inefficiency R&D Tax Refund: £6K An ecommerce business specialising in sports accessories developed a specialist shipping integration software to improve inefficiencies in their business processes. Working with a subcontractor, they modified a program to make it more efficient for use within their business. Significant improvements were made to the software program to integrate the software into their systems, and the internal R&D project generated a claim worth £6k over a two year period.
Although the business set out to resolve inefficiencies in their business process, they were too involved in the project to recognise their own work to be innovative.
Scaffolding contractors Secret R&D: Save Time & Money R&D Tax Refund: £22K These guys are experts in scaffolding, specialising in the provision of scaffolding installations to a wide range of industries. They had invested in the development of a free-standing scaffolding structure to be used for internal scaffolding, primarily to save their time and cost when setting up jobs.
The company didn’t know what they had set out to do was an R&D project. They just wanted to do something innovative to save them time and money! But in developing a new innovative scaffolding product they were doing R&D, and acquired a corporation tax repayment of over £22K for a two-year period.
Business: Gastropub & Hotel Secret R&D: Pub: Improve service R&D Tax Refund: £7K
A Gastropub and Hotel based in the North of England, wanted to provide a menu that catered for all tastes and needs, as they wanted everyone to find something really good on the menu. They knew it didn’t make economic sense to have a dozen different menus, so they worked on a new menu to cater to all dietary requirements.
The gastropub developed an innovative menu that could be produced to cater to vegan and gluten-free diets, without compromising on the customer experience.
The owner was convinced there wouldn’t be a claim because it’s just ‘what they do’ but when he reflected on all the hard work that goes into crafting their unique dishes, he was able to see the numerous research and development steps in their work.
This work realised an R&D Tax claim of £7k for the gastropub.
Business: Fashion & Apparel Secret R&D: Sales tool R&D Tax Refund: £15K
A women’s clothing manufacturer and retailer developed a unique sports clothing range for pregnant women which they understood would qualify for an R&D claim. However, alongside this, they delivered a complex website project which included the development of a global directory of maternity fitness instructors. Developed as a sales tool, the business was completely unaware that they had built something completely new and innovative.
Altogether the R&D projects equaled a total benefit of just over £15K.
It’s not easy for businesses to identify all the R&D in their business, it requires a complete mindset change, and cultural shift to make it work business-wide. Share these case studies with your clients and inspire them to take a step back, after all, they could be sat on secret R&D….
RADISH TAX: YOUR R&D TAX RELIEF SERVICE
For DTX’ers with a potential R&D Tax Relief client you’d like to discuss please book a scoping call with Tim here.
Radish Tax by Diagnostax is a specialist R&D Tax Relief provider. Find out more about Radish Tax by Diagnostax.
Please note, as this blog was published prior to 1st April 2023, there is no reference to the changes which have been brought into place for the R&D tax relief schemes.
For expenditure on or after the 1st of April 2023, the following changes in rates of relief apply:
SME – the Enhanced Expenditure uplift rate has fallen from 130% to 86%; and the tax credit rate has fallen from 14.5% to 10% (exc. R&D intensive loss-making SMEs).
RDEC – the credit rate has increased from 13% to 20%.
Further, data and cloud computing costs can now be included within the claim qualifying expenditure calculation. Pure mathematics now falls within the scope of the relief.
For submissions on or after the 8th of August 2023, it is now required for an Additional Information Form to be submitted prior to submission of the R&D claim. For reference, please see our blog here.