The HMRC Research and Development Tax Scheme was created to encourage business innovation and stimulate the economy, through supporting firms to bring new products and services to market. Yet, due to time constraints, lack of awareness and doubts around eligibility or the legitimacy of the incentive, there are thousands of companies that are not currently taking part in the scheme, particularly within the haulage industry.
Research and Development Specialists Ltd (RDS), an expert in helping companies to navigate the Government scheme, is reaching out to firms in the haulage sector, after numerous successful claims for similar businesses; most of which had commissioned custom-built IT systems that made them eligible to claim.
RDS helped to recover £292,782.51 for Leicester-based haulage specialists Pall-Ex Group Limited, after it identified that the development of a new overarching internal system aimed at creating universal cohesion to their global operations qualified for tax relief.
Here, Mark Joyner of Research & Development Specialists LTD (RDS), based in the North of England attempts to demystify R&D in a bid to reach more haulage firms that could benefit from a cash influx of hundreds of thousands of pounds.
“We’ve had great success within the haulage sector,” begins Mark. “Data automation is often a key priority for larger haulage firms, as is the need to coordinate and execute interdepartmental tasks on a global scale.
“We often find companies working in this space will invest in bespoke IT systems due to the complexities of their business. The research and development related to this then makes them eligible for tax credits, but that’s not widely known. Lots of companies are missing out.”
What is R&D?
Research and development (R&D) tax credits are a valuable government incentive that rewards UK businesses for investing in innovation. It is a powerful source of funding for businesses looking to grow and develop new products, services, procedures, and internal systems.
There is a misconception that to qualify for R&D tax relief then a business must employ people in lab coats and be undertaking scientific research, but that is not the case. Any type of research and development could qualify.
Some examples of an IT development for the haulage industry that would qualify as R&D would include:
- The engineering of unique scripts to aid in data automation and data migration from legacy systems to a superior/new system
- The design and subsequent engineering of a unique platform capable of streamlining global processes
- The continuous testing, trialling and modifications of systems architecture in efforts to achieve superior functional capability within the overall deliverable
- The engineering of machine-based intelligence to aid in resolving invoicing inefficiencies, accurate data segmentation and interdepartmental report generation
- The integration of global internal systems into the customs database to ensure all departments adopted a proactive stance to the import/export changes presented by BREXIT
Which businesses can claim?
Any UK limited business can claim. There are no restrictions on the type or size of business although there are different types of R&D scheme depending on whether you fit HMRC’s guide as being an SME or large company.
For the SME scheme, a company must employ less than 500 people and have a turnover of less than £85m or a balance sheet total of less than £73m. An SME’s eligible R&D costs receive an additional 130% deduction when calculating the taxable profit.
Eligibility is focussed on the research project rather than the type of business. Typically, an R&D claim can be submitted for a business’s current and previous financial year.
Some R&D project criteria to be aware of…
The project must relate to your company’s trade, and you must be able to explain how the project:
- Looked for an advance in science and technology.
- Had to overcome uncertainty.
- Tried to overcome this uncertainty.
- Could not be easily worked out by a professional in the field.
Does the project have to be successful?
No, there is no rule that says you need to have a finished product or service brought the market. The research/development phase is enough for you to qualify.
How do I claim the money?
For profitable businesses, the benefit is applied as a reduction in corporation tax. If a claim is historical, the monies will be claimed back as a repayment of overpaid corporation tax.
For companies operating at a loss, the R&D claim will increase the loss arising. This loss can then be set against prior and future profits of the company, or it can be turned in to a cash repayment by using a process HMRC calls ‘surrender’, whereby the business takes a slightly lower benefit percentage for the ‘cash now’.