Claiming R&D tax credits is a huge financial boon for any business. With more time allowance and resources to level up their business, SMEs benefit most. However, the process of claiming R&D tax credit carries with it the risk of an audit by HMRC.

Although R&D tax credits are still underutilised by companies, the number of applications has been steadily rising since they were introduced in 2000. The number of claims made in the 2017/18 tax year were 31% higher than the previous one, for example. This has increased the level of scrutiny from HMRC in its claims review process. 

The outcome of an HMRC audit can cause significant damage to a business, in terms of the time it takes to conduct as well as the possible monetary penalties. This is an eventuality your client will want to avoid at all costs. That’s why we’re here to tell you how.

The risks of an HMRC audit

Most of the time HMRC conducts an audit when a company’s application contains suspicious information and/or data that doesn’t add up. It could be that HMRC wants more information on specific areas of the application. Other possible factors include your client’s tax position and their relevant industry sector/field.    

More often than not HMRC conducts investigations before any money changes hands. Although this does not mean the risk associated with an HMRC audit is diminished. It can take anywhere from a few months to a few years for an inquiry to reach its conclusion. During this time, your client will be diverting people, time, and resources to solving the problem. This is a massive drain on the business’s operating potential, not to mention a big logistical headache. A poorly handled investigation can also put your client in bad stead with HMRC, compromising future interactions on tax matters.

If an inquiry is launched after a tax credit payout, it can result in dire financial consequences. Your client might be forced to repay the money received as part of the tax credit, plus up to 100% of the total qualifying expenditure they outlined in their claim. HMRC can also enforce an interest charge on the repayment of any money spent.

Ways to reduce audit risk

As discussed in our previous blog, Six easy steps to claim HMRC R&D tax credit, there are a few steps in applying for R&D tax credits. As a result, there are many opportunities to reduce your client’s risk of an HMRC audit.

• Recognise what qualifies as R&D

The Department for Business, Energy and Industrial Strategy (BEIS) provides guidance on the work that qualifies as R&D. They say, “when a project seeks to achieve an advance in science or technology. The activities which directly contribute to achieving this advance in science or technology through the resolution of scientific or technological uncertainty are R&D”.

Your client should keep this wording in mind and consider how the innovations they’ve made contribute to their field. The start and end of qualifying projects should be included to ensure all bases are covered. This will be important when writing the technical narrative of your client’s application.

Your audit risk is enhanced if your client lists costs that don’t contribute towards R&D projects because HMRC will reject the claim and launch an investigation. We discuss qualifying R&D expenditures here.

• Use best practices when collecting R&D data

You should present your client’s R&D project data clearly and in depth. This becomes complicated when calculating the percentage of different expenditures that are claimable. For example, some employees might have split their time between R&D and non-R&D projects.

Some of the best practices involve tracking relevant R&D data at various points throughout research projects.

• • Assign an R&D manager: someone within each project whose job it is to track R&D activities as they are undertaken. This is a role best allocated to a person in a managerial position.
  • Source code comments: in qualifying software development projects, comments can be implanted in the code to record the development process. This helps the claims processor visualise the link between the work and what is being claimed.
  • Create a dedicated R&D email: create an email address used by you and your staff with regards to all matters concerning R&D costs and projects. When it comes to preparing your client’s application, this will be a huge time-saver and help ensure nothing is missed.
• Double-check your numbers

An easy way for HMRC to justify an audit is if numbers in an R&D tax credit claim application don’t add up. Therefore, recording and laying out your client’s financial data accurately is a must to avoid an audit!

• Review using technical staff

The staff allocated to your client’s R&D projects are the ones who know the most about the qualifying work that is being done. As such, they are the best people to use to document and review the relevant sections of the application process. Their technical knowledge can be used to catch corner cases that may affect the claim’s eligibility.

A final point: sometimes HMRC will randomly audit companies that apply for R&D tax credits, so don’t panic if you’re facing an investigation.

Put your client’s mind at ease by using made.simplr

The risk of an HMRC audit should not discourage your client from pursuing an R&D tax credit claim. made.simplr offers state-of-the-art R&D tax credit software that makes inputting your client’s data quick and easy. By connecting with the Xero platform your client’s company information is fully integrated with their claim. This allows us to guarantee the accuracy and security of any R&D tax credit claim.

By working with us your client will also get access to a team of R&D tax credit experts eager to provide for their business. Many of our specialists have themselves previously worked for HMRC as claims reviewers to boot. They are on hand at every stage of the application process to remove any trace of audit risk for your client.

Book a demo today.

If you want to get the most benefit for your client’s business through R&D tax credits, you have to maximise your claim. This will involve doing a lot of research and sometimes it’s difficult to even know where to start when preparing your application. It’s worth it to put in the time and effort though, as without it your client could miss out on thousands worth of savings. This financial injection has proven to be vital for many small to medium sized businesses, particularly during the Covid-19 pandemic.

This blog post is here to give you a taste of the sort of expert tips that’ll give your client the most bang for their buck when applying for R&D tax credits.

1. Figure out your company size

Although almost any company can apply for R&D tax credits, HMRC offers tax credit incentives for firms that are either SMEs or large companies. You should familiarise yourself with the following definition HMRC uses to calculate the size of companies:

• SMEs: Less than 500 employees, a turnover of less than €100 million and a balance sheet worth below €86 million.
• Large companies: More than 500 employees, a turnover of more than €100 million and a balance sheet worth over €86 million.

SMEs qualify for the SME scheme while large companies qualify for the Research and Development Expenditure Credit scheme(RDEC).

The SME scheme is far more generous than the RDEC, offering a much higher percentage of claimable R&D expenditure. As such, your client will be able claim more on their R&D tax credits as a small or medium size company.

Read more about these schemes on our previous blog here. 

2. Know what you can and can’t claim

Deciding what costs your client will claim is going to determine the scale of the tax savings they will benefit from. The more total costs your client claims, the more valuable their R&D tax credit will become. However, if any of the costs claimed turn out to be incorrect then they could be faced with an HMRC investigation. This is why knowing the extent of the costs your client can claim is so important.

Some things to note:

• Always work within your client’s company’s financial year, not the tax year of HMRC. Any expenses outside the relevant financial year, qualifying or not, are not eligible to claim.
• You cannot list your client’s directors as subcontractors when calculating R&D expenditure. This means you also can’t claim directors’ dividends as qualifying R&D expenditure. HMRC cross-checks companies’ listed directors so make sure this is done right.

You can find a comprehensive list of qualifying R&D costs here.

3. Receiving grant funding won’t always compromise a claim

More businesses than ever have received some form of financial aid due to the damage done by the Covid-19 pandemic. It’s likely your client falls into this category and they’re resultantly skeptical about whether they can still claim R&D tax credits. This doesn’t mean their projects are unclaimable though.

If your client’s grant falls under the category of notified state aid then they unfortunately will not be able to claim R&D tax credits under the SME. They are still open to pursue a claim through the RDEC though. Non-notified state aid will affect the eligibility of your client’s projects depending on how much funding was contributed towards them.

Read about how Covid-19 funding will affect R&D tax credit claims here.

4. Utilise your losses

Just because your client’s company is unprofitable doesn’t mean they should be discouraged from applying for R&D tax credit. Utilising the ‘surrendering a loss’ mechanism allows unprofitable companies to obtain a short term cash injection from HMRC. 

In this way, the total loss is exchanged for cash credits at 14.5% of the original value.

If your client expects to be profitable in the next year we wouldn’t advise surrendering their losses. This is because they can be used to offset the tax on their profits in future.

If your client is concerned about this looking bad on their books don’t worry, enhancing their loss through the tax incentive schemes won’t be reflected in the accounts.

5. Spend time on writing a great technical narrative

Outlining your client’s R&D projects, the work they’re doing and how it fits within HMRC’s definition of R&D, is really the meat and potatoes of any R&D tax credit application. Here are some do’s:

• Keep it short and concise – this helps your client’s application to be as easy to digest as possible.
• Don’t use language unique to your field – you want HMRC to understand the problem your client has solved, as well as the lengths they’ve gone to to solve it. Using jargon can create confusion. 
• Write from a technical point of view – prove that your client has overcome a technical uncertainty or made advances in technology. That’s what HMRC are looking for.

6. Check your numbers

This can be a time consuming process but sitting down and checking your figures match on every part of your client’s application is a must. This includes their profits and loss, tax calculations, along with the contents of their CT600. If all your client’s costs are consistent with each other it helps HMRC to process the claim more easily.

Put the tips into practice with made.simplr

There’s a lot of nuance regarding some areas of an R&D tax credit application. That’s why getting expert help and advice when completing an application for R&D tax credit is guaranteed to ensure a maximised claim. At made.simplr our online R&D portal software allows you to input your client’s data, clearly laying out where and how they can maximise their claim.

In addition, our experts are on hand to answer any questions that come up during the process. Making an R&D tax credit claim also presents many opportunities to make mistakes. Our experts remove any risk of this while garnering the maximum reward for your client. It’s our mission to ensure your client benefits from R&D tax credits to the highest degree they can. Plus, our all-in-one R&D tax software offers a great solution to scaling your R&D practises.

Contact us for a demo today.

10 or 20 years ago it was the norm for R&D tax credits to be reserved for companies focused on science. In particular, those eligible were in the pharmaceutical, technical and/or manufacturing sectors. The range of companies that can qualify for R&D tax credits is now an ever-expanding list, however. HMRC themselves say, ‘the scope of qualifying expenditure for R&D tax credits ought to evolve to reflect modern trends in research and development’.

While the range of businesses conducting valuable R&D projects has been expanding for years, in recent times, innovation has been fast-tracked due to the restrictions of the Covid-19 pandemic. Most companies have been forced to rethink the way they operate, be it in terms of staffing, networking or sales. This has also opened up new fields for investment. For example, video conferencing, social apps and online marketplaces were all suddenly in high demand.

As a result, it’s more likely than ever that your client’s company can qualify to claim R&D tax credit. Failing to check that their business qualifies for R&D tax credit does it a great disservice. This is because you are missing an opportunity to obtain a ‘no strings attached’ form of financial aid for them.

Read on to find out if your client’s company could be eligible to qualify for thousands of pounds worth of tax credits and refunds.

What qualities do HMRC look for in companies?

R&D tax credits are designed to encourage companies to spend more on research and development projects, which is done by offering a reduction on the company’s tax bill – though only on the expenditure involved directly with the R&D project. The end goal? Increasing the UK’s investment in innovation and maintaining the UK’s status as a global leader in technology.

The HMRC government website states that R&D tax credits ‘can be claimed by a range of companies that seek to research or develop an advance in their field. It can even be claimed on unsuccessful projects’. As such, when it comes to qualifying for R&D tax credits it’s not so much about the company type, but the type of projects your clients are undertaking.

As of 30th June last year, the latest available data shows there were 59,265 claims for R&D tax credits in the financial year 2018-9. Of these, 52,160 were small to medium size businesses. One explanation for this is that small businesses have much more to gain from R&D tax credits than larger ones. This is because R&D tax credits allow companies to conduct R&D projects more easily, thereby enabling growth. Another reason could be that more SMEs are actively looking for ways to make savings, for the simple reason that most of the time smaller companies have tighter profit margins. Finally, the scheme for SMEs allows them to claim a far higher percentage refund on their expenditure tax than larger companies, but more on that later.

How to recognise a qualifying business

HMRC still has a few qualifiers that businesses must meet before they are able to qualify for R&D tax credits.

First, HMRC requires that the business pays corporation tax in the UK. This is to confirm that the company is based in the UK. It must also be a limited company. Partnerships, sole traders and public liability are not eligible to qualify for R&D tax credit. HMRC also outlines what it considers as research and development work that qualifies for tax credits. The businesses conducting this type of research will in turn be most likely to qualify for R&D tax credits.

As mentioned earlier though, almost any businesses nowadays can find projects that will qualify for R&D tax credits. Other than the requirements outlined above, businesses can qualify from any industry. That being said, there are still some areas that are more likely than others to include R&D tax credit qualifying companies. Some notable fields and their company examples are as follows:

• Admin and support services – HR, recruitment, call-centres, tour operators, rental and leasing.
• Wholesale and retail trade – Vehicle sales and repairs, retailers and wholesalers of food, electric goods, clothing, cosmetics etc.
• Information and communication – Insurance, publishing of books, software and directories, software development, video and sound production.

If your client’s business falls into any of these areas then it’s likely they’re conducting projects that will qualify for R&D tax credits. In that event, we strongly suggest investigating if they qualify.

Which scheme does my client’s business qualify for?

The first step is working out what type of scheme your client is going to apply to. This will fall into one of two categories based on the business in question, which will dictate the tax credit incentive you must use. The amount of tax credit you are able to claim depends on the size of the company you’re doing the accounts for.

SME scheme: As the name suggests, this is a scheme available to small and medium sized businesses. To qualify you must:

• Have fewer than 500 staff on the payroll.
• Have a turnover less than €100 million.
• Have a balance sheet worth less than €86 million.

The scheme allows companies to claim back up to 33% of their qualifying R&D expenditure. This is in the form of a payable tax credit, a tax reduction, or a combination of the two.

The SME scheme works by offering an enhancement to the percentage of qualifying costs that are being claimed. Most eligible R&D costs are claimed at 100%, with some notable exceptions. The scheme allows companies to deduct an additional 130% from their qualifying costs, for a total of 230%.

What if my client’s business isn’t making a profit?

Even if your client’s company is currently making a loss you will be eligible to claim through this scheme. Although this will only be up to 14.5% of the company’s surrenderable loss for that accounting period. While surrenderable loss is essentially the same as R&D expenditure, it has its exact definitions outlined in section 1044 and 1045 of the scheme.

Loss-making companies can increase the percentage of their R&D tax credit claim by surrendering their loss. Doing this means the business will not carry the loss forward into the next financial year. Every £1000 of loss surrendered can be exchanged for a cash credit worth £145. Coupled with the enhancement mechanism, it is possible for loss-making companies to hit the maximum 33% tax credit on R&D costs. Businesses that expect to be loss-making in the following year might want to avoid this, however. This is due to the fact that surrendering the loss means it cannot be used to offset your corporation tax liability later down the line.

Businesses that break even aren’t left out of the SME scheme either, although they do get the worst deal. This is because at break even, companies have no tax corporation tax to reduce or refund. They also don’t generate R&D expenditure as their revenue is equal to spending.

Advance assurance: SMEs are able to apply for advance assurance to guarantee acceptance of their R&D tax credit claims. The company must have completed R&D projects or be planning to undertake R&D. They are also eligible if they are linked to a group of companies, none of which have claimed R&D tax credits before. It’s not necessary to apply for advance assurance, though it does remove the risk of filling out an application in vain.

You cannot apply if your client is a corporate serious defaulter or has entered into a Disclosable Tax Avoidance Scheme.

Getting expert assistance with R&D tax credits will remove the need to apply for advance assurance.

Research and Development Expenditure Credit (RDEC):

This scheme is open to large companies, which are defined using the same parameters outlined earlier. So for the purposes of this scheme, to count as a large company you must:

• Have more than 500 employees that work for you.
• Have a turnover in excess of €100 million.
• Have a balance sheet worth over €86 million.

From 1st April last year this scheme allows for businesses to claim back 13% of their qualifying R&D tax credit.

Small businesses can claim this scheme if they are subcontracted to do R&D work for a large company. SMEs can also claim if they have received a grant or subsidy to complete an R&D project, something that has become increasingly common due to the Covid-19 pandemic.

Related: How Covid funding will impact R&D tax credits.

Still unsure? Costs affected by business type

It’s important to note that the scheme your client qualifies under will have ramifications when it comes to the amount you can claim for certain costs. You should consider this when figuring out if your client’s company qualifies, as this will confirm if the time and effort applying for R&D tax credit is worth it. It almost always is, but nevertheless, qualifying costs are something experts are on hand to advise you on.

The main example here is the cost of subcontractors – work done by individuals external to the business. These costs are included at 65% when calculating the total qualifying R&D expenditure. However, subcontractor costs can be accounted for at 100% if you are one of a pair of connected companies.

To read more about all the costs businesses can claim when applying for R&D tax credits, head to: what expenses qualify for R&D tax credit.

Connected companies

Connected companies are two businesses linked through some form of shared control. There are a number of definitions for this:

• One person has control of both companies.
• Two people who are themselves connected have control of both companies.
• A group of two or more people controls both companies.

All the above require that either you hold more than 50% of the voting rights of the other company, or they hold over 50% over you.

Connected companies qualify to claim R&D tax credits. However, the turnover, balance sheet and staff numbers of both companies must be included when considering eligibility. This is also likely to influence which R&D scheme your client is eligible for.

Finally, as mentioned previously, connected companies that qualify benefit from an increased claims percentages on certain R&D costs.

Partner companies

While there are similarities between partner companies and connected companies, partner companies share a lesser level of control over one another. As a result, each company in the partnership still retains autonomy. Here are the definitions of partner companies:

• One company has control over 25% of your voting rights or capital.
• You control at least 25% of another company’s voting rights or capital.

Just as with connected companies, when you’re working out if your client qualifies for R&D tax credits a portion of the other company’s staff, turnover and balance sheets should be included. This will be in proportion to the percentage of control that one company has over the other. For example, if a partner company has control of 31% of another’s voting rights, only 31% of the aforementioned company information qualifies. As with connected companies, this is a necessary caveat to keep in mind regarding your R&D incentive scheme.

Check if you qualify with made.simplr

At made.simplr we’re here to make every stage of securing R&D tax credits easy and secure, and it starts with working out if you qualify. If you’ve read this far you’ll now know that figuring out if your client’s company qualifies for R&D tax credits is not always obvious. Equally, choosing the incentive scheme that is a fit for them sometimes involves a lot of nuance. This is before taking into account how various company aspects will affect claim amounts down the line. Our team of seasoned experts can help with all of this.

Before submitting a claim, why not use made.simplr’s R&D calculator. This allows you to enter your client’s company details and determine their eligibility straight away. It also gives you a quick estimate of how much they are able to claim.

made.simplr’s software is the easiest way for your firm to provide added-value to your clients without taking any risk. Track, plan & manage every R&D Claim from beginning to end.

Book a demo with us today.

The R&D tax credit scheme continues to grow in popularity each year, but the number of claims made is still well below the number of projects that may be eligible for this relief.

It is difficult to put an exact number on how much R&D tax relief goes unclaimed but previous attempts have estimated that as much as 80 per cent of eligible projects don’t benefit from the relief available to them.

In many cases, businesses assume that this form of tax relief is only suitable for those at the cutting edge of digital technology or science, but the relief covers most research and development that can show that it:

• Aimed to make an advance in an area of science and technology
• Involved technological uncertainty
• Made efforts to overcome this uncertainty
• Couldn’t have been easily worked out by a professional in the field.

 In short, if a company is a technical specialist in their field that makes an advance, and they weren’t sure if they could achieve the scientific or technological aims of the project, you’ve got technical uncertainty and a potential claim if others couldn’t have delivered a similar solution.

This means, for example, that if a business in the agricultural sector develops a new method of fertilising soil, or if a surgeon creates a new technique in plastic surgery, their R&D investment could be recouped via this scheme.

It is often down to these businesses’ accountants and advisers to spot the potential for a claim in their accounts, but this is sometimes not easily achieved.

In many cases, it is only where an accountant digs deeper into a company’s finances or has a strong bond with clients that it can spot the potential for a claim.

Even where an opportunity to make a claim is identified, the business or its accountants may not have sufficient resources, time or knowledge to prepare a successful claim.

During the last year, businesses in the UK have had to adapt quickly to the ever-changing rules and regulations around work and life.

This is likely to have sparked a wave of small, but important innovations within many companies, which could be eligible for relief, where it is identified.

How Made.Simplr can help

To help businesses and their accountants, we have developed a cloud-based solution, which automates the claim preparation process – taking away the burden of producing a claim and speeding up the process considerably.

By using our technology accountancy firms can also considerably reduce the cost of preparing a claim and open up the relief to a wider potential pool of clients.

If you are digging deeper to find out whether a business can make a claim, why not speak to our team to find out how we can help.

 

The Government has stated its changes to the Research and Development (R&D) tax credits system for small and medium-sized enterprises (SMEs), which aims to decrease the number of claims for projects that the system was not initially intended to cover.

The SME R&D tax credits allow loss-making businesses to claim a tax credit worth up to 14.5 per cent of the R&D component of their surrendered losses, plus obtain an immediate cash flow benefit.

Declared within the Government’s current set of tax policy announcements, these changes will apply to accounting periods which commence on or after 1 April 2021 and are designed to exempt businesses with low National Insurance Contributions (NICs) and PAYE who are carrying out genuine R&D work.

However, with these new rules in place, it limits the amount of payable R&D tax credits an SME can claim.

Additionally, after the Treasury’s consultations, the Government has introduced a cap on any claims for payable credits from 1 April 2021, and there will be a threshold of £20,000 under which the cap will not apply.

This cap is to be the threshold amount plus 300 per cent of the businesses’ total NICs and PAYE liabilities for the period.

Businesses can be exempt from this cap if they meet the following criteria:

• The business does not spend more than 15 per cent of its qualifying R&D expenditure on subcontracting R&D to or the provision of externally provided workers.
• The business’ employees are either creating or preparing to create or manage intellectual property (IP) – which businesses need to provide evidence of.

For more information or advice on claiming R&D tax credits, book a demo.

 

Economists at the Organisation for Economic Cooperation and Development (OECD) have released a new report that assesses how effective tax breaks are at increasing research and development (R&D) activities.

The new study has found that for every euro that Belgium or Portugal offer in corporate R&D tax breaks, each nation gets more than €3 back in increased R&D spending. Scandinavian countries, such as Sweden, are not far behind, getting back just short of €3.

While tax reliefs are effective in these countries in others, such as France, the return on R&D tax breaks is far lower. In fact, the French government gets back just 34 cents in extra business R&D expenditures for each euro offered via its tax relief system – the lowest of all OECD nations.

Across the OECD as a whole, about 55 per cent of total public support for business R&D comes in the forms tax breaks, with the remainder provided via “direct” subsidies, such as grants or loans.

The OECD has said the reason behind the apparent success of some schemes but not others is complex. Analysis of the data tends to suggest that tax breaks are most effective in spurring small and medium-sized companies to invest, especially if they don’t already do significant R&D activities.

In comparison, tax schemes for larger businesses, where more R&D activity is already undertaken, are less effective.

The data shows that on average, across the 20 OECD countries studied, R&D tax incentives for SMEs were worth €1.4 of additional R&D activity from the industry for every euro they offer in lower taxes.

Another key finding of the report was that where a limit is set on the amount of tax relief available for each business it tended to encourage, rather than discourage more spending.

Finally, the study revealed that tax incentives are most effective at helping businesses to fund close-to-market, experimental development projects rather than early-stage basic or applied research, which was more effectively encouraged via grants and subsidies.

Patrick Child, deputy director-general for research and innovation at the European Commission, which co-funded the study, said governments “needed to become smarter than ever in using scientific evidence…to guide policy choices”.

The study did not look at the UK’s use of tax incentives, but the latest data shows that £5.1 billion of tax relief helped to fund £36.5 billion of R&D expenditure in 2017-18 – meaning the Government supports around £7.15 worth of spending for every £1 of support it makes available through R&D tax credits.

To find out how we can assist you and your clients with R&D tax credit claims via our innovative software, contact us for a demo today.

 

The Government has awarded £400 million in Research and Development (R&D) funding to regional research and innovation projects in the UK.

The funding forms part of the Government’s long-term aim to invest 2.4 per cent of UK GDP in research and innovation, with R&D funding forming a significant part of the strategy.

Businesses and universities in Cardiff, Edinburgh, Belfast, Glasgow, Kent, Liverpool and Bristol will benefit from the funding for projects including smart-packaging to reduce food waste, health products to fight infection and zero-emissions technology for marine vessels.

Alok Sharma, Business Secretary, said: “The announcement will ensure some of our country’s most promising R&D projects get the investment they need to take off and thrive.

“Working with the private sector and our world-class universities, we’re backing new and innovative ideas that will create jobs and boost skills in every part of the UK for years to come.”

The Government has stated that the programmes will deliver long-term economic benefits in each city and area, creating new jobs, cultivating new skills and encouraging a competitive future for the UK economy as businesses look to rebuild and recover from the coronavirus pandemic.

The investment forms a part of UK Research and Innovation’s (UKRI) ‘Strength in Places Fund’, which aims to support R&D projects that will be a catalyst for local and regional economic growth.

To find out how Made Simplr could help you and your clients obtain R&D funding for relevant research and innovation projects, contact our expert team today.

HM Revenue & Customs (HMRC) recently released new consultation documents that seek to expand the allowable expenditure for R&D tax credits to cover cloud accounting and data costs.

Responding to the release of the documents, the R&D tax specialists at cloud accounting platform Made.Simplr have said changes to the scope of expenditure are long overdue and should be comprehensive to ensure that UK businesses can innovate and grow.

Made.Simplr is a new cloud accounting platform that automates much of the R&D claims process for accountants and their clients, using AI to draw the necessary information together and prepare HMRC-ready claims.

Having helped hundreds of businesses complete the claims process, they say there are countless examples of where businesses have missed out £100,000’s of relief due to the inability to claim costs associated with data and cloud accounting, especially hosting costs.

Depending on the outcome of the current consultation, HMRC may look to expand the rules surrounding R&D tax credits to include a proportion of this expenditure within a claim.

“For a long time, the argument seemed to be that hosting and other data costs, which were an integral part of some companies’ R&D, were not sufficiently separate enough from a firm’s commercial work to meet the criteria for a claim.

“However, similar costs within a business, such as utilities which are consumed in the R&D process can be claimed for if apportioned properly. It would seem that similar rules for cloud accounting and data cost could make a massive difference to many businesses who are reliant on digital services as part of their R&D process.”

Sarah said that the limits on expenditure in these areas often proves to be a particular impediment to accessing the tax relief for certain sectors, such as IT and the creative industries.

Eneko Igartua, Made.Simplr’s Operations Manager, added: “The reality is that if a firm is large enough and invests in a private server network dedicated to just R&D, then they may be able to claim some of the expenditure through the tax credit system.

“This means that the current rules are a significant disadvantage for smaller innovators, such as start-ups and scale-ups, which are more reliant on this kind of financial support.”

Made.Simplr believes that further reform of the R&D tax rules, beyond those being considered, could help to provide the support that forward-thinking businesses need as they attempt to recover from the current crisis.

“The Government may be missing an opportunity if they do not review and amend the rules around R&D comprehensively enough,” added Eneko. “Here is an opportunity to support those businesses that could lift the UK out of the difficulties it faces and into a new era as one of the world’s leading innovators.”

The team at Made.Simplr is calling on members of the accountancy profession and their clients to take part in the Government consultation, which closes on 13 October 2020. To submit a response, please visit www.gov.uk/government/consultations/the-scope-of-qualifying-expenditures-for-rd-tax-credits-consultation

Projects across the UK have been given funding to test the revolutionary high-speed connectivity available via 5G technologies.

The new projects will receive a share of £30 million through 5G Create – an open competition to develop innovations that support UK industry, as part of the wider £200 million 5G Testbeds and Trials programme.

The money will be used for research and development (R&D) in the following projects:

• AI-controlled traffic lights to reduce pollution and congestion in Manchester
• Remote music festivals using 5G at Brighton Dome
• Cost reduction for the RAF’s Tempest fighter jet programme in Preston
• BT Sport will use 5G to transform watching live sports through virtual reality
• NHS video consultations for low-income families in Liverpool
• 5G’s ability to boost productivity via autonomous trucks at Nissan’s Sunderland car factory.

Matt Warman, Minister for Digital Infrastructure, said: “We are helping innovative thinkers across Britain use their creativity to harness the power of 5G and boost economic productivity, cut pollution and congestion, and develop the next generation of entertainment.

“The new funding we are announcing today will help us pioneer new ways to seize the opportunities of 5G and bring tangible benefits for consumers and businesses across the country.”

The Government has already funded 24 5G testbed projects across the UK. These have helped with the development of 70 different 5G technologies, products and applications.

The Government has already confirmed a second round of funding through 5G Create, which will be revealed later this year.

5G is a growing area of interest for many businesses and the development of technologies in this area could benefit from R&D tax credits, even if they are unable to obtain additional grant funding via the Government.

To find out how made.simplr could help you or your clients with the funding of 5G and other technology products, book a demo today.

Official figures from HM Revenue & Customs (HMRC) suggest that agriculture companies in the UK are missing out on millions of pounds worth of Research & Development (R&D) tax credits every year.

The data has revealed that the UK agriculture sector made up less than 0.5 per cent of UK R&D tax credit claims and now those in the sector are being encouraged to consider if they are eligible to make a claim.

However, for those people that did claim from the sector, the average value of the claim was almost £52,000 in 2017-18.

Under HMRC’s rules, to get R&D relief, you need to create a new product, service or process, or change an existing product, service or process for the better.

There are five broad categories which can classify Agricultural R&D claims:

• Staff costs
• Subcontractors
• Externally provided works
• Consumables and heat
• Light and power

Businesses must consider the full range of both qualifying activities and cost categories.

Currently, agricultural businesses are benefiting from improvement due to technology. R&D tax claims can come from process improvements, production improvement and scalability and quality control.

This is happening all over the industry, in areas such as the growing of crops, animal production and activities to support agriculture and post-harvest crop.

Even in situations when businesses are already claiming R&D tax credits, they may not have fully explored the full potential of that claim.