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As R&D tax reliefs remain an important part of innovation, it can be difficult for accountants to identify which businesses are likely to be innovating.
While there are certainly sectors that are better known for R&D, as R&D tax consultants, we have seen innovation arise in surprising places.
If accountants want to know whether a business may be embarking on valid R&D projects, it may be worth looking at societal trends that could influence the process.
Why is it worth considering societal trends with R&D?
At its core, R&D is seeking to resolve a problem that exists in the world.
This might not be an immediately apparent problem – innovations like making a battery 10 per cent more efficient may not have caused mass excitement, but they are vital for paving the way to progress.
However, there are plenty of instances when a problem is known and many innovative businesses will be scrambling to seek a solution.
The medical sector is a hotbed for research that is tackling well-known and understood problems while seeking innovative solutions.
It is relatively simple to explain why work to increase the survivability of cancer treatments, for instance, would be of merit and should benefit from R&D tax relief claims.
Yet there are other shifting societal trends that are causing problems that need addressing.
The move away from alcohol consumption has caused an upsurge of innovation in the previously underrepresented food and beverage sector.
Where companies producing alcoholic beverages used to only worry about new flavours and attractive packaging, the societal shift has caused them to engage in actual R&D.
The creation of low-alcohol and alcohol-free beverages that mimic the qualities of existing drinks would have counted as innovation when established.
This is due to the variety of ways that alcohol impacts a beverage, including affecting the taste, texture and shelf life.
Without alcohol, new innovations were needed to ensure that a comparable product could be created that would not spoil faster than the previous iterations.
The shift away from alcohol also inspired innovation in the form of enhancing the nutrition of beverages more generally by fortifying drinks with vitamins.
This fed into the societal trend towards health and ensured that businesses could still compete.
Will societal trends affect R&D tax relief claims in the future?
Innovation often involves anticipating what the public will want and putting it in their hands before they begin to miss it.
This means that innovation is likely to arise in a range of different sectors as attitudes and values change.
Younger generations bring fresh perspectives, actively challenging the status quo enforced by their predecessors.
It may not be possible to say what the next great societal shift will be, but moves towards environmentalism and the embracing of AI are both yielding a wealth of R&D.
As such, accounts can work to better position themselves by having conversations wit ha more diverse range of clients about their potential involvement in R&D.
While many businesses will still fall outside the scope of R&D, a conversation with innovative companies is often a good starting point to assess whether they are seeking an advance or just doing routine work.
When R&D is ambiguous, seeking support from an R&D tax consultant can provide clarity.
We can help you to understand whether an innovative business is eligible for an R&D tax relief claim and work to compile it accordingly.
Don’t get left behind by shifting societal trends. Speak to our team today.
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