An R&D project basically encompasses the research and development activities that a company will undertake when developing new products and services or when improving products or services which already exist. The R&D phase is the first stage of the project that involves all of the research around market needs and then development of prototypes and products.
Of course, with any R&D project, there is uncertainty. It is not until you complete the process, that you know whether it will be successful or not. This issue is actually something that causes lots of uncertainty when a company is claiming for R&D tax relief. In fact, those companies that only focus on applying with successful R&D projects could be missing out.
If we look at the HMRC guidelines it clearly states that, “not all projects will succeed in their aims. What counts is whether there is an intention to achieve an advance in science or technology”. So, if we translate that it basically means that if the R&D project has met the correct criteria then you can apply for the relevant R&D tax relief.
Often, we are asked about the eligibility of an R&D project and if a claim can be made. In simple terms the following applies:
| ELIGIBLE | NOT ELIGIBLE |
| The project did benefit science and technology but was stopped due to commercial reasons | The project did not benefit science and technology but was stopped due to commercial reasons |
| The project did benefit science and technology but was stopped due to commercial reasons | The project did not benefit science and technology but was stopped due to technical reasons |
Calculating the cost for any R&D tax credit, both successful and unsuccessful is the same. You simply total the time spent on the project, summarise the materials used and then add the 2 costs together. This then forms the eligible expenditure for the claim.
If you are looking for some help with your R&D tax credits claim, please feel free to call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.
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