What are the common myths that hold back R&D tax relief claims?

The recent revelation of the HMRC statistics concerning R&D tax relief claims has shown a drop in the number of claims being made, especially by smaller businesses.

While this is a desirable outcome if ineligible claims are being left unfiled, there is a concern that some of the decline may be due to persistent myths.

These cause uncertainty with accountants and innovative businesses and could see many eligible projects miss out on the vital funding they need.

We want to dispel some of those myths so that R&D tax relief claims can be approached with confidence.

Which myths prevent valid R&D tax relief claims from being submitted?

If the official statistics are anything to go by, it seems like the most damaging myth is that only large companies can make R&D tax relief claims.

Any company that conducts R&D and pays Corporation Tax is eligible to make an R&D tax relief claim, provided the work they do constitutes R&D for tax purposes as defined by HMRC.

Understandably, there is a point where smaller companies may not feel the benefit of submitting an R&D tax relief claim if the amount of money recuperated is relatively small, but there are no strict size limits for inclusion or exclusion of claims.

This is tied into the myth that there must be a minimum spend for the claim to be valid, although this one does have some basis in truth, as if you only stood to reclaim £1 in tax relief, then it would not be worth anyone’s time.

There is a myth that only profitable companies can make R&D tax relief claims.

This is untrue as loss-making companies can claim R&D tax reliefs and this can be a key way of keeping them going while they try to turn things around.

Concerns around the restriction of R&D tax reliefs to specific sectors can also make innovative businesses miss out on vital claims.

While it is true that some sectors are viewed more favourably by HMRC, R&D can happen in nearly every sector.

However, work conducted to make aesthetic or commercial improvements without tackling underlying uncertainties around science or technology is ineligible and some sectors will find most work falls into this category.

Work in the humanities is generally considered ineligible, but there may be rare instances where some scientific or technological innovation does take place.

How can R&D tax relief myths be dispelled?

A greater awareness of the true guidelines for R&D tax relief claims is needed to ensure that these myths no longer act as a barrier to valid claims being submitted.

We work to educate accountants and innovative businesses to get a better insight into the standards maintained by HMRC.

Ultimately, the shifting regulations and tightening of scrutiny have resulted in some myths arising and this will happen as more changes take place.

As R&D tax consultants, we want to help innovative businesses make the most of their research by getting the funds they need.

If you want to learn the reality of R&D tax relief claims, be sure to speak to our team today.

Tom Mason