5 Tell-Tale Signs that your SME Qualifies for R&D Tax Credits

5 signs your company qualifies for R&D tax credits
5 signs your company qualifies for R&D tax credits

The government’s R&D tax credit scheme has become a significant annual windfall for many innovative SME’s with the average annual claim being worth £54,214.

Yet in our experience the vast majority of eligible companies are not taking advantage of this scheme due to a perceived lack of eligibility, a lack of awareness of the scheme and scepticism around how much a claim would be worth.

If you are wondering about your company’s eligibility or how much a claim would be worth to you, then we’ve got you covered: Our team has put together the 5 most telling signs that you should be investigating your company’s eligibility further.

Before we ‘dive in’, it’s worth mentioning that if your company is currently not subject to UK corporation tax then your company will not be eligible to make an R&D tax credit claim. With that out the way, here are the things to look out for:

  1. Your business is creating something new or solving difficult technical problems in unique ways (or has done so in the past 3 years)

Imagine that a company has developed a new type of software – something that the market hasn’t seen before. This would be a strong indicator that the company is eligible to claim R&D tax credits.

Now imagine that the same company has developed software that already exists on the market but the development team had to experiment with different methods, algorithms or architectures to achieve the project’s goals. In this case, it would still be eligible.

If fact, solving difficult technical problems in unique ways is more important to an R&D claim than the end result or even a successful outcome. Also, what you are developing does not need to be for your clients’ use – it could be something used to improve the way your own company operates.

Now apply the above analogies to your company – would they apply? If so, let us know.

  1. Your business is improving an existing product, process or service (or has done so in the past 3 years)

In order to meet the government’s definition of ‘R&D’, your company does not necessarily need to create something ‘from scratch’.

Going back to the software analogy – if a company has made an appreciable improvement to existing software by using in-house staff or by outsourcing the development work, then it’s probably worthwhile to check its eligibility. A specific example of this could be improving performance, scalability, reliability or other non-functional areas.

Related: R&D tax credits for software development

  1. You employ (or outsource) specialists with high-level qualifications

The type of staff you employ is a good indicator of whether your company carries out work that qualifies for an R&D tax credit claim.

The more skilled the staff, the more likely it is that you will qualify – unless, of course,  they are being used to make the tea! Good candidates include scientists, technicians, engineers, architects, software developers etc.

These types of highly-skilled employees are relied upon to deliver projects that meet the government’s two main criteria for being considered innovative: The ‘advancement of knowledge’ and the ‘resolution of technical uncertainties’.

  1. You operate in a sector that is rich in opportunity for claiming R&D tax

While it’s important that you don’t discount your company’s eligibility based on your sector alone, there are particular sectors where R&D is embedded into their ‘business as usual’ activities more often.

In our experience, these are:

  • Software development
  • Manufacturing
  • Engineering
  • Architecture
  • Biofuel
  • Cleantech

Related: The Top 5 Sectors for Claiming R&D tax credits

  1. There is ongoing or large-scale investment into new projects in your company

How much you are investing into new projects can also be a good indicator of whether you qualify. A larger investment (which can come in the form of salaries, subcontractor costs, materials etc.) increases the chances that you had to solve technical challenges along the way. The scale of your investment will also affect the size of your claim.

If your company is not currently claiming R&D tax credits, we hope that this has given you some clarity on your company’s eligibility. If you have any doubt, let us know and we will be happy to give you a definite answer without any obligation from you.