Despite launching in 2000, the government’s research and development (R&D) tax credits scheme remains largely unheard of.
It’s estimated that a whopping £84 billion of R&D tax credits go unclaimed every year, and 80% of eligible companies underclaim or don’t claim at all.*
So why are so many businesses not picking up their rewards for innovating? It’s largely down to the myths surrounding the scheme that everyone here at Easy R&D is eager to banish.
Myth 1: Only scientists and specific narrow sectors conduct R&D that qualifies for the R&D tax credits scheme
Truth: Qualifying R&D can happen in absolutely any sector — even those without a scientific or technical foundation.
The stereotypical image may sit with techies and scientists donning white lab coats and goggles, but we’ve submitted successful claims for jewellers, farmers, carpenters and bakers — to name but a few.
We’ll need to demonstrate that a competent professional worked on your project and faced a scientific or technological challenge, but it doesn’t need to be rocket science. What qualifies may surprise you.
Myth 2: R&D only applies to products and services to sell in the open market
Truth: Developing new products and services, or modifying existing ones, are the most common forms of R&D — but they aren’t the only ways to claim. Even if the R&D is purely for internal purposes, there’s still scope to claim.
Myth 3: You can only claim for the past financial year
Truth: You can claim up to two years before the end of your 12-month accounting period.
Myth 4: You need to spend a minimum on R&D to be eligible for R&D tax credits
This myth stems from the £10,000 minimum spend required when the scheme first launched in 2000. George Osbourne removed this in his 2012 budget, meaning there’s now no minimum needed.
The PAYE cap, which came into force in April 2021, limits the amount of credit you can claim from the scheme to 300% of your total PAYE/NIC liabilities.
The reality is that this affects only a minority of companies with high rates of subcontractor work or small companies set up solely for R&D work. The aim is to minimise the number of fraudulent claims.
Myth 5: The R&D needs to be successful to claim R&D tax credits
Truth: HMRC understands that R&D does not always result in success. If the result were predictable, it wouldn’t be R&D at all. Even if the whole R&D project is shelved with no functional outcome for your business, you can still claim. Great, isn’t it?
If you’re a small to medium business that’s subject to Corporation Tax, you can take the first step in claiming back 33% of your R&D spend here.