The UK’s R&D tax relief schemes provide essential support to businesses actively engaged in research and development. The rate of benefit and qualifying costs vary depending on the scheme under which the business claims. If you’re uncertain about which scheme applies to your business or need help optimising your claim, chat with one of our advisors at Grantica to ensure you’re making the most of your R&D tax relief opportunities.
The New Year is a perfect time to review your previous year’s research and development activities and plan for future projects. By doing so, you can ensure continued funding streams back into your business through R&D innovation incentives.
Many companies claiming R&D tax relief unknowingly miss out on claiming the full amount of relief they are entitled to because of a lack of awareness of the eligible cost categories allowable within R&D tax relief claims. (We often see this when companies are preparing R&D claims in-house without the support of an external advisor.) In addition, if the business or those individuals preparing an R&D claim are not up to date with HMRC’s latest regulations, you might have missed out on additional costs you could have claimed. Below we’ll explore the cost categories that businesses frequently overlook, helping you to maximise your R&D claims and reinvest this in your innovation projects.
Staff Costs
When it comes to staffing costs, most businesses include costs that go through the payroll which include the gross salary, employer National Insurance Contributions (NICs), and employer pension contributions. Think beyond basic wages… Did you know you can also include in your claim bonuses linked to R&D performance (although there are certain restrictions). In addition, it is possible to claim reimbursed expenses incurred on undertaking eligible R&D activity. For example, if an employee travels specifically for R&D-related activities, has incurred this expense out of pocket and is subsequently then reimbursed for it, these costs can be included in an R&D claim.
Consumables
When claiming consumables, this cost category can include consumable or transformable materials and includes water, fuel and power costs. For the expenditure to qualify, it must be incurred on items that are used directly in the R&D process and are no longer useable in their original form because they are used up or irreparably transformed. This can include prototypes confined to R&D that have been completely scrapped (and cannot be sold to a third party) — this also includes prototypes that are not successful.
Software
For accounting periods beginning on or after 1 April 2023, additional qualifying expenditure can be included in your R&D claim, which includes data license costs and cloud computing costs spent on R&D. Cloud computing costs cover costs associated with data storage, hardware facilities, operating systems and software platforms.
As you plan your upcoming R&D projects, understanding which costs qualify for tax relief can make a significant impact on your budgeting decisions. Ensure you’re maximising your claims and optimising your financial strategy.Â
Mathematics
Although mathematics is not a qualifying cost category in itself, this might be an area where companies are able to maximise their R&D claims. Historically, projects with a focus on achieving an advancement in pure mathematics have been ineligible activities for R&D tax purposes; from 1 April 2023, the costs associated with pure maths can be included as eligible R&D activity within your R&D claim.
Conclusion
Neglecting overlooked costs can mean missing out on a substantial benefit which your company is legitimately entitled to. Engaging with a professional advisor can help ensure your claims are accurate and comprehensive, maximising the benefits for your business.
If you want to talk through your previous R&D claims to understand if you have been claiming the relief you are entitled to claim or want to discuss your future R&D claims, then feel free to reach out to Shaun Bartle to learn more about how Grantica can help you.
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