How important are R&D tax relief claims for innovation funding?

Having a well-balanced range of funding solutions to pave the way for seeking advances is a core part of how innovative businesses are able to keep growing.

The accountants who help clients with R&D may find themselves being asked about the best ways to achieve sustainable funding and these questions often turn to considering how viable R&D tax reliefs are.

With new data released showing the way in which they fit into many businesses’ investment strategies, now might be the time to consider how your clients can make the most of R&D tax reliefs.

Are R&D tax reliefs a good source of funding?

Unlike other forms of investment, R&D tax reliefs do not have to be applied for in advance.

They operate in relation to the amount of qualifying expenditure that the innovative business naturally utilises over the course of a valid project.

While grants or loans could be underwhelming for businesses that find they do not get the amount of money needed to make the project possible.

This is only likely to occur with R&D tax reliefs if the following project is significantly more ambitious than the former or if the full scope of qualifying expenditure has been overlooked, resulting in a weaker claim.

As such, research has indicated that 54 per cent of high-growth businesses note that R&D tax credits have supported their innovation.

These are often utilised alongside other Government-backed sources of investment like the Apprenticeship Levy and the Patent Box scheme, though there are concerns that many businesses are still not making the most of R&D tax reliefs.

In contrast to the 54 per cent using R&D tax reliefs, the same research indicated that only 30 per cent of innovators had successfully accessed government grant funding, with others finding applications too time-consuming or competitive.

The low barrier to entry for R&D tax reliefs positions them as a strong source of funding but only when they are effectively utilised.

How do innovative businesses make the most of R&D tax reliefs?

Working with an R&D tax consultant is the best way to make sure that innovative businesses are able to get the full amount of funding that they deserve to support future innovation.

There are many aspects of an R&D project that can be counted as qualifying expenditure, many of which are overlooked by accountants and the businesses themselves.

Qualifying expenditure can include staff costs, subcontractors (subject to rules), software, cloud computing, data licences, consumables and certain other R&D-related expenses.

In general, a cost can be counted as part of an R&D tax relief claim if it is incurred as a result of a valid R&D project and would not have been incurred otherwise.

The other major strength of R&D tax reliefs is that they are not dependent on the success of the project or its commercial viability.

Many other investments will likely want to get a return on that investment when the advance makes the company a profit, but R&D tax reliefs can be accessed for projects that have failed or been abandoned.

While some accountants and businesses are still cautious about accessing R&D tax relief claims due to the tighter compliance checks that have been brought in over the years, their value means that they simply cannot be ignored if a business is serious about achieving advances in the long term.

Our team of experts have in-depth knowledge of the system and an ability to put together R&D tax relief claims that align with HMRC’s criteria and highlight the innovation that has occurred.

We will work with you to ensure that all qualifying expenditure is captured within a claim, so that innovative businesses are less reliant on other sources of funding.

Once an advance has been achieved, we can also support the Patent Box process to secure the IP and access additional funds.

R&D tax reliefs are as valuable as they are allowed to be, so get in touch to make the most of this vital resource.

Adam Bointon

Adam Bointon is a Technical Director specialising in R&D Tax Credits for SMEs in manufacturing and software sectors. With over 15 years’ experience, he works closely with businesses to identify qualifying R&D activities and prepare clear, compliant claims. He combines technical expertise with a strong understanding of economics and finance to support successful outcomes. Adam also contributes to industry webinars and CPD sessions, sharing insights on R&D tax relief and HMRC requirements.