Outsourcing Costs vs. In House

Diagnostax Blog 3: R&D Outsourcing Costs vs. In House

Should I outsource my R&D activity or keep it in-house?

If you’re considering whether to bring some or all of your R&D project work inhouse versus outsourcing it, you’ll want to feel confident that you are making the right decision for your business operationally, but also to maximise your R&D claim.

Perhaps you’re about to kickstart a new R&D project, or you’re thinking about outsourcing as you don’t want to take on a new employee. Either way, we want to equip you with all the info you need to determine the best way to incur your R&D development costs: in-house or outsourced.

In the world of R&D you’ll often see outsourcing referred to as ‘subcontracting’. Let’s start with some definitions and explanations of what we mean when we say ‘subcontracting’.

SUBCONTRACTED WORK IN R&D PROJECTS

When it comes to R&D, subcontracted work is defined as when you contract and pay someone else to carry out R&D project activity on your behalf.

There are two scenarios to be aware of when it comes to subcontracted work in R&D projects:

SCENARIO 1: A business subcontracts work to you

If a business subcontracts R&D work to your business, you might not be able to claim R&D tax relief, or only a limited claim is available to you under the RDEC scheme – reducing your claim to 10.53% of the qualifying expenditure.

SCENARIO 2: Your business subcontracts work to a third party If your business subcontracts R&D work to a third party (unconnected to your company) – you can still claim for qualifying costs but the relief available is only 65% of those costs.

ONLY 65% OF COSTS CAN BE CLAIMED

ONLY 65% OF COSTS CAN BE CLAIMED

As you can see, before you make any decisions, there are some key points to consider, to determine the best way to incur your R&D development costs: in-house or outsourced.

As outlined above, if you are a business undertaking an R&D project for your own business, and you have sub-contracted part of the R&D project to a third party, you can only claim for 65% of the costs – and the R&D work must be for a specific part of the project.


Here’s an example of what this might look like for a business:

A UK company has an R&D project and they are considering whether to subcontract the design stage of the project, or use an in-house employee. The design stage is expected to take 6 months.

The annual salary of an adequately skilled employee is estimated at £60K.

CostEmployeeOutsourced
6-month salary£30,000 
Estimated additional fringe costs (pension, NIC, etc)£5,000 
Payment for project work to outsourcer £35,000
Initial cash cost to company£35,000£35,000
R&D allocation*90%100%
Subcontractor restrictionNil65%
R&D expenditure claimable£31,500£22,750

*You’ll notice the allocation of R&D time is slightly higher for the outsourcer, as employees are likely to have other responsibilities.

Let’s take a look athow the potential benefit breaks down for the Company:

A) For a Profitable Company

Corporation tax saving due to R&D£7,780.50£5,619.25
Difference£2,161.25 

B) For a Loss-Making Company

Tax credit claim£10,505.25£7,587.125
Difference£2,918.125

If the business is the subcontractor, they may not be able to claim under the SME R&D Scheme, but if they qualified under the RDEC scheme at 10.53% of qualifying expenditure:

Cash refund£3,316.950
Difference£3,316.95 

So when it comes to the numbers, it’s clear to see that the tax saving is more attractive if you go down the in-house route.

However, taking on a new employee is a big call to make, as it comes with its own challenges. There’s the cost and time involved in finding the right person, with the right skillset that will fit into the business. Then there is the ongoing time of managing that person. It’s a significant commitment to make

NOT CONVINCED IN-HOUSE IS THE RIGHT WAY?

If you’re on the fence when it comes to keeping your R&D in-house, here are some important pros and cons to consider if you’re considering the possibility of outsourcing your R&D……

keeping your R&D in-house pros

PROS

  • NO IN-HOUSE EXPERTISE: Sometimes you just don’t have a choice! For example you may be looking to develop a new app but with no expertise, subcontracting to a company with the expertise is the only option.
  • ACCESS TO MORE TALENT: By subcontracting, you have access to a greater pool of talent, global even!
  • CHEAPER & FASTER: When it comes to R&D projects that are completely different to anything that you have done in the past, it can be much cheaper and faster to look at subcontracting rather than setting everything up in-house from scratch.
  • SYSTEMS & PROCESSES: A quality subcontractor will already have the robust systems and processes in place to ensure the R&D work is tracked and expectations are managed – potentially a huge weight lifted.
  • STAY FOCUSED: Outsourcing to a subcontractor helps to keep your business and its resources focused on what it is already doing.
keeping your R&D in-house cons

CONS

  • THEY DON’T KNOW YOUR BUSINESS: It can be difficult for sub-contractors to have the same level of understanding of your business as your employees. However, this doesn’t always have to be a negative, sometimes a different perspective is what is needed for innovation.
  • CONFLICT IN EXPECTATONS: It’s important expectations are managed, as differences of opinion can arise when it comes to the brief, the objectives or the quality of the work. This is particularly tricky if the requirements of the R&D work change after the project has started.
  • CONTROL & TIMING: Letting go of control, and the day-to-day running of the project work can be difficult. But the best way to address this is to discuss your requirements and agree milestones or check points to ensure the timely delivery of the project. The subcontractor should have processes in place ready to tackle this.
  • IP & CONFIDENTIALITY: Management of intellectual property, and the potential leaking of information is a risk when you take your R&D activity outside of your business. It’s easier to manage, and less likely to happen when all of your R&D activity stays in-house.
CONS •	THEY DON’T KNOW YOUR BUSINESS: It can be difficult for sub-contractors to have the same level of understanding of your business as your employees. However, this doesn’t always have to be a negative, sometimes a different perspective is what is needed for innovation.   •	CONFLICT IN EXPECTATONS: It’s important expectations are managed, as differences of opinion can arise when it comes to the brief, the objectives or the quality of the work. This is particularly tricky if the requirements of the R&D work change after the project has started.   •	CONTROL & TIMING: Letting go of control, and the day-to-day running of the project work can be difficult. But the best way to address this is to discuss your requirements and agree milestones or check points to ensure the timely delivery of the project. The subcontractor should have processes in place ready to tackle this.   •	IP & CONFIDENTIALITY: Management of intellectual property, and the potential leaking of information is a risk when you take your R&D activity outside of your business. It’s easier to manage, and less likely to happen when all of your R&D activity stays in-house.

THE VERDICT?

So, there you have it. Unfortunately, there isn’t a black and white answer. We’re sorry! Whether you outsource aspects of your R&D project has to be right for your business. Our advice? First, start with the calculations. Can you afford to lose 35% of your R&D claim money coming back into your business? Then, it is a case of being honest and looking at the business case of bringing in a new employee – how do the pros and cons stack up?

THINK YOU MIGHT BE ELIGIBLE TO CLAIM?


If you think you might be eligible to claim R&D Tax Relief, and you’d like to find out more about how we can help you make your claim, please book a call.

Diagnostax. R&D software expenses

Diagnostax Blog 5: R&D and Software Expenses

R&D What software expenses can I claim for?

Almost every R&D Tax Relief claim that we process includes some form of software costs. But it’s hardly surprising, as every business today has software costs. We use software in just about every business process we do! It’s also the one R&D cost that most businesses feel comfortable with, when they come to make their R&D claim.

But what you might not know, is that there is one big grey area, meaning certain software costs cannot be claimed.

Let’s find out the fundamental rules when it comes to software costs, and what exactly this mysterious grey area is.

R&D software expenses

SOFTWARE COSTS: THE FUNDAMENTAL RULES

The rules around software costs would appear to be straightforward:

  • If the software has been purchased only to be used in an R&D project, then you can include 100% of the cost in the R&D tax claim.
  • If you use the software for other business activities that sit outside of the R&D project, then you need to calculate an appropriate proportion of the software’s cost to be included in your claim.

Simples, right?

Diagnostax. R&D software costs

SOFTWARE COSTS: THE GREY AREA  

With software, there are often ‘other costs’, that are incurred alongside the software when it is leased from external parties. It’s these costs where the grey areas start to creep in. These costs fall under the banner of ‘cloud computing’ and charges could be for a whole range of activities, including use of software, storage rental, and support.

Diagnostax. CLOUD COMPUTING & HOSTING

CLOUD COMPUTING & HOSTING

Cloud computing and hosting is particularly relevant for businesses that are involved in R&D projects related to the development of software. It’s these ‘cloud computing’ costs that unfortunately do not meet the requirements of any of the qualifying criteria to make an R&D claim. It’s quite common for businesses to purchase packages which are used to support activity across their business operations as well as R&D activity. Therefore, it’s key to track the costs dedicated specifically to hosting the testing and development environment, when using the services.  The likelihood is you’ll be using software somewhere in your business, and it could impact your R&D claim. Like a lot of R&D categories, software has its grey areas, but that’s what we are here for, we will work with you to ensure you submit an accurate R&D claim.

As we speak new changes are on the horizon to include cloud computing and data costs, but stick with us and we’ll make sure you’re up-to-date as the changes come in.

THINK YOU MIGHT BE ELIGIBLE TO CLAIM?


If you think you might be eligible for R&D Tax Relief, and you’d like to find out more about how we can help you make your R&D claim , please book a call

Subcontractor or Contractor - what R&D can I claim

Diagnostax Blog 6: R&D Subcontractor or Contractor

Subcontractor or Contractor – what R&D can I claim?

Subcontractors. Maybe you use them, maybe you are one, maybe you are acting as one for a one off project. Whatever the circumstances, when it comes to R&D Tax Relief, subcontractors should be considered carefully when claiming R&D Tax Relief. On too many occasions now, we have seen companies miss out on money that should have been back in their business, and we don’t want that to be you.

In this article, we look at eight rules to determine WHEN subcontractors, and contractors can claim, and WHICH scheme you can claim via.

KEY TERMS & DEFINITIONS

Let’s start with some key terms and definitions, as it might get a little technical in here….

The Contractor is the company that has ownership of the R&D project, and hires the Subcontractor.

The Subcontractor is the person or company hired to deliver work that contributes to the R&D project.


There are two different Subcontractor types:

A Connected Subcontractor is a company or individual controlled (meaning owned more than 50%) by the same shareholder(s) as the contractor.

An Unconnected Subcontractor is any subcontractor that is not a connected subcontractor.


Finally, here is a very quick description of the two R&D schemes available to claim via:

The RDEC scheme allows a company to claim up to 13% cash back of qualifying costs incurred.

The SME scheme allows a company to claim up to 33% of cash back of qualifying costs incurred.

Diagnostax. R&D Subcontractor claim

SUBCONTRACTORS: WHEN CAN I CLAIM & WHICH SCHEME SHOULD I USE?

As a subcontractor there are two main scenarios with specific rules around when and what R&D you can claim for.   

SCENARIO 1 – When acting as a subcontractor to a large company, the subcontractor can claim but only via the “RDEC” scheme.

Example. A small company who specialises in testing products to satisfy a certain legal regulation. If a large multinational company was making a new product and contracted the small company to do some tests, the small company can potentially claim under RDEC.

Note that in this case the large company cannot claim for the costs paid to the small company, so there is no risk of a ‘double claim’ occurring.

SCENARIO 2 – When acting as a subcontractor to anyone, but you are doing your own separate R&D project alongside that work, you can claim via the SME scheme.Example. The small company above is improving an internal process for the testing of products that will lead to efficiencies in the delivery of its services to all customers. Staff within the team spend time specifically trying to develop the process. This could count as a separate project, claimable under the SME scheme.

SUBCONTACTORS CAN’T CLAIM WHEN…… acting as an SME subcontractor to another SME for their R&D project.

Example. The testing company above is doing work as a subcontractor to another SME. The SME contractor may be able to claim (under the SME scheme) for the payments to the testing company, and so to avoid a ‘double claim’, the testing company cannot make a claim itself for work on this project.

Diagnostax. R&D contractor claim

CONTRACTORS: WHEN CAN I CLAIM & WHICH SCHEME SHOULD I USE?

As a contractor there are four main scenarios with specific rules around when and what R&D you can claim, for payments to subcontractors:

SCENARIO 1: When a large company subcontracts to individuals, partnerships or qualifying bodies (excluding limited companies), it can claim via the RDEC scheme.

Example. A large multinational contracts some research from a university on its project.

SCENARIO 2: When an SME company is grant funded / subsidised and subcontracts to individuals, partnerships, qualifying bodies (excluding limited companies), it can claim via the RDEC scheme.

Example. A small company wins a grant to develop proprietary software for an online portal that will have significant economic and environmental impact if adopted by the target market. Some of the software development is contracted to a freelancer who is an individual. These subcontracted costs could be claimable under the RDEC scheme.

SCENARIO 3: When an SME company subcontracts a specific part of an R&D project to an unconnected party, it can claim for 65% of the costs as qualifying expenditure via the SME scheme.

Example. The same company as above is developing a similar piece of software to test commercial application in a different industry. A third party company is used for the some of the development work costing £30,000. A claim may be available for this cost, under the SME scheme, for up to £6.5k as a cash credit.


SCENARIO 4:
 When subcontracting R&D work to a connected subcontractor, you can usually claim via the SME or RDEC scheme, however the rules for what you can claim for may be more or less restricted based on the circumstances.


CONTACTORS CAN’T CLAIM WHEN
…… subcontracting to Limited companies under the RDEC Scheme.

Example. The company above, who won a grant to develop proprietary software, outsourced some of the software development to individual freelancers, and some to a limited company agency. Only the costs paid to the individuals is within scope to claim. The amounts paid to the limited company cannot be claimed.

HMRC PAYE CAP

HMRC PAYE CAP

Please note from 1 April 2021, HMRC brought in a limit on the payable tax credit a business can receive from a claim via the SME R&D Tax Credit Scheme. Businesses can now only claim R&D Tax Relief up to the value of 300% of their combined PAYE and NIC liability. The first £20,000 is exempt, but any amount above this threshold will be capped.

The cap specifically applies to businesses that are unprofitable, and businesses that end up with an ‘artificial loss’, which they could then surrender for a cash injection, because of the enhancement mechanism of the R&D Scheme. In these circumstances, subcontractor fees from businesses that are unconnected may be restricted from being eligible for R&D tax credits, as might salaries for overseas workers. However, you should still be allowed to include a fraction of the PAYE & NIC liability of a connected business that is delivering R&D activities for you.

There is however an exemption to be aware of, for which you need to pass a two test criteria. For the first test a business’s employees must be “creating, preparing to create, or actively managing intellectual property” – otherwise known as Patent Box Relief.

The second test is based on a calculation of fees paid to subcontractors and externally provided workers of connected businesses. This total amount must be no more than 15% of a company’s R&D expenditure. If you pass both tests, you will be exempt from the cap.

Diagnostax. R&D OVERSEAS CONTRACTORS

OVERSEAS CONTRACTORS

Finally, it’s also worth noting that contractors do not have to be based in the UK, and the R&D work they deliver for you, does not to have to be undertaken in the UK.


THINK YOU MIGHT BE ELIGIBLE TO CLAIM?

If you think you might be eligible for R&D Tax Relief, and you’d like to find out more about how we can help you navigate your R&D claim, please book a call.

How will external funding affect my R&D claim?

Diagnostax Blog 9: R&D and Funding

How will external funding affect my R&D claim?

Companies often think they can only make an R&D claim if they have funded the entire R&D project out of their own pocket. There are some nuances of course but is unlikely that external funding would void a claim. Companies can receive grant funding and R&D Tax Credits for the same R&D project.

Let’s take a look at the five most common types of funding and how they could impact your R&D Tax Relief claim:

1. PRIVATE FUNDING (e.g. share equity or private loans)

There are no restrictions on making an R&D claim if the project is funded by a private funder with equity shares or loans.

For example:

£100k equity or debt funded into SME by director or private investor / investors.
£80k spent on developing app e.g. salaries, software licences, outsourced developers (this is restricted to 65%).
£80k uplifted to get additional £104k R&D tax relief deduction.
£184k can be sacrificed for an R&D tax credit of £26.7k.

R&D LARGE CORPORATE

2. LARGE CORPORATE (e.g. equity)

If your R&D project is funded by a large corporate that takes a significant portion of equity, you may only be able to claim via the RDEC scheme. This might be restricted even further if the R&D work was outsourced, or if the company has no PAYE bill.

For example:

£6m equity into SME from large corporation, taking 60% of the company.
£1m spent on developing a prototype of a new product, invested in staff costs, materials and consumables.
Up to £105,300 could be claimed as R&D tax credits under the RDEC Scheme
.

R&D Tax Credits

3. GRANTS

Many companies believe that if you receive a grant, you cannot claim R&D Tax Credits for the same R&D work. This is often not the case. However, a grant will impact your R&D Tax Credits claim, and the amount you can claim.

How it affects the claim depends on whether the grant is classified as notified state aid or non-state aid, and whether it is project specific or non-project specific.

Here is a breakdown of four key scenarios:

a. Notified state aid: Non-project-specific grant

If a grant is classified as notified state aid and is non-project specific, R&D projects you spend this funding on will not be eligible for SME relief but you can claim via the RDEC scheme. An example of such a grant is the Coronavirus Business Interruption Loan scheme (CBILS).

For example:

A £500k CBILS loan is received. The funds are not segregated by the business on receipt. £1m is then spent on 3 separate projects using the £500k CBILS and £500k of company reserves. Sadly, the projects only qualify for the RDEC Scheme in this case, meaning a maximum cash refund of £105,300.

b. Notified state aid: Project-specific grant

This relates to grants classified as notified state aid but they are project specific i.e. the grant is to provided funding for a specific project.  Any grant funds invested in the project that are eligible for R&D Tax Relief should be claimed via the RDEC scheme. However, any other funds privately invested in other R&D projects that are eligible, can be claimed under the more generous SME scheme. 

Here’s an example:

An innovate UK grant to develop a prototype machine is awarded, where 50% is covered by the grant and 50% is matched by the company using its own funds. The project cost is £1m. The £500k funded by the grant is eligible for up to 10.53% cashback (under RDEC) as is the £500k self-funded element. The company also spends £100k on a separate project, which could be eligible for the R&D SME scheme at up to 33.35% cashback.

c. De Minimis state aid grant

If a company has received less than €200,000 over three years, this grant may qualify as de minimis aid under the De Minimis Regulations. This type of grant doesn’t have to be reported to the European Commission, and is not counted as state aid. Any of the funding invested in qualifying R&D projects must be claimed via the RDEC scheme. However any private funds invested in R&D projects that are eligible, can be claimed via the R&D SME scheme. 

d. Non-state-aid grant

As with de minimis state aid grants, any of the non-state-aid grant invested in qualifying R&D projects must be claimed via the RDEC scheme. But any other privately invested funds can be claimed under the R&D SME scheme.

COVID-19 FUNDING

4. COVID-19 FUNDING

Since the launch of various emergency grants to help businesses through the Coronavirus pandemic, there has been some uncertainty about how these funds will impact R&D Tax Relief Claims. We can confirm these initiatives have been classified as notified state aid, and R&D projects you spend this funding on will not be eligible for SME relief but you can claim via the RDEC scheme.

We’d recommend ringfencing these funds, so there is a clear audit trail of how the funds were invested.

This is especially important with CBILS given the potential for it to bring all costs for all projects within the RDEC scheme, where the self-funded element might have otherwise been eligible for the R&D SME scheme

5. SEIS, EIS & VENTURE CAPITAL TRUSTS

If you have raised funds for your small business through an Enterprise Investment Scheme (EIS / SEIS) or Venture Capital Trust (VCT), you’ll need to know how these funds impact your R&D Tax Relief Claim. The good news is R&D Tax Relief can be claimed in conjunction with these funds, and there are no limitations on how those funds can be used, or the qualifying R&D expenditure.

THINK YOU MIGHT BE ELIGIBLE TO CLAIM?

If you think you might be eligible for R&D Tax Relief, and you’d like to find out more about how we can help you make your R&D claim, please book a call.

R&D Deadlines

Diagnostax Blog 1: R&D Deadlines

When it comes to R&D, timings are key!

One of the most important aspects when making an R&D Tax Relief claim is timeframes. Not only are there strict deadlines, but depending on your business circumstances there is an optimum time to make your claim. The last thing you want is to miss out on maximising your R&D Claim, or even worse lose out on claiming altogether!

Let’s find out those all important dates, and make sure you never miss out on money that belongs back in your business.

WHAT IS THE DEADLINE FOR MAKING AN R&D CLAIM?

The hard and fast deadline for making a claim is two years AFTER the end of the accounting year in which you incurred the costs. Pass this date and it’s game over….the money has gone.

But let’s take a look at the exceptions to the rule, as these could come in handy for you one day. Although with us, you shouldn’t need them…

WHAT ARE THE R&D CLAIM DEADLINE EXCEPTIONS?

WHAT ARE THE R&D CLAIM DEADLINE EXCEPTIONS?


1. EXTENDED YOUR YEAR END?

If your company has an extended year end, then the filing date changes to the end of the extended accounting period.

e.g. A September 2019 year end is extended to March 2020, extending the period to 18 months.

The deadline for claiming the costs incurred in the 18 month period from September 2019 to March 2020, is March 2022.

2. OOPS FILED LATE?

If your tax return was filed late, the hard deadline is not automatically extended, but HMRC can use their discretion.

e.g. A September 2019 return is filed late in March 2021.

HMRC have the discretion to allow an amendment beyond September 2021. You can’t rely on this, but it’s worth being aware of for negotiating purposes if it ever happens.

3. GOT AN ENQUIRY WITH HMRC?

If HMRC has an enquiry open with you, an amendment to the tax return would have to be made as part of the HMRC enquiry. In theory the deadline is extended when an enquiry is open. However, again this is up to HMRC’s discretion, so the safest course is to always put the claim in before the normal deadline i.e. within one year of the original filing date to ensure HMRC do not refuse the claim. Why risk it?

Now we have the deadlines down, it’s time to look at the optimum time to make your R&D claim, to ensure you are making it work in the best way for your business.

WHEN SHOULD I MAKE MY R&D CLAIM?

WHEN SHOULD I MAKE MY R&D CLAIM?

Knowing when to make your R&D claim depends on the bottom line; ultimately whether you made a profit or not.

MY COMPANY MADE A LOSS…

If your company made a loss and you want to get some cash back into the business asap, the answer is simple, make your claim as soon as possible, which is when your accounts and tax return are prepared and ready for filing. You’ll probably want to make the tax credit claim and get the money back and working for your business.  Get it done ASAP.

Side note: If you are in the fortunate position of not needing the cash, and if you forecast making profits in the future, then another option is to hold onto the R&D losses so you can offset them against your future tax bills. This could happen for example if you had a loss making year due to Covid, but are now back on track to make profits in the current year.

MY COMPANY MADE A PROFIT…

Now if your company has made a profit, it’s a little different. The benefit will come by reducing the tax bill which is due 9 months and 1 day after your year end. Let’s explore that a little….

Company A has a 31st March 2021 year end.

They have taxable profit of £100,000, and are expecting a corporation tax bill of £19,000, due on 1st January 2022. However, Company A spent £50,000 on R&D.

The R&D relief they are due is calculated as follows: £50,000 x 130% = £65,000

Company A can now subtract £65,000 from the taxable profits, to reduce the corporation tax bill.

The corporation tax due is calculated as follows: (£100,000 – £65,000) = £35,000 x 19% = £6,650

Company A makes a saving of £12,350! Pretty cool huh?

The real benefit for Company A comes down to the timings and the impact on their cashflow:

SCENARIO 1 – CLAIM BEFORE TAX RETURN

Company A completes the R&D claim prior to the tax return before 1st January 2022 (when the tax bill is due). As a result they pay £12,350 less on 1st January 2022, keeping the cash in the business.

SCENARIO 2 – CLAIM AFTER TAX RETURN

Company A completes the R&D claim after the tax return, but before the deadline of 31st March  2023. As a result they can claim a refund of £12,350 from HMRC, plus a tiny bit of interest.
You see, with R&D, it’s all about the timings! 

WE CAN HELP YOU…

At TENNICK ACCOUNTANTS , we work with you to ensure you are doing everything reasonably possible to maximise your R&D Tax Claim, including making your claim at the right time for your business.
If you think you might be eligible to claim, or your business circumstances have changed and you’d like to discuss your R&D claim, please do get in touch.

Secret R&D

Diagnostax Blog 12: Secret R&D

Are you sat on secret R&D?

Even though you already claim R&D Tax Credits, there’s every possibility your company could be sat on ‘secret’ R&D. But what do we mean by ‘secret’ R&D? Well, we often come across clients that have developed or built a product, process or service specifically for themselves without recognising that what they are doing is research and development. They are so focused on just ‘doing’ the work they do, they don’t recognise the steps they are taking. It’s only when you start thinking in a certain way that you begin to recognise that you are sat on products, service and processes that you could claim R&D Tax Relief for.

With that in mind, we want to share some examples, to give you an idea of the types of activity and situations in which secret R&D occurs.

ARE YOU SAT ON SECRET R&D?

Secret R&D can manifest in many different ways, through things like:

  • Investing in technology and bespoke integration to improve efficiency
  • Developing specialist software to resolve inefficiencies in business processes
  • Developing new products to improve service delivery
  • Developing an existing service to improve customer experience
  • Developing new systems to improve business processes

Here’s five real life examples of businesses that had been sat on secret R&D..

Are you sat on secret R&D?

Business: SAAS Technology solutions
Secret R&D:
Business as Usual
R&D Tax Refund:
£7.5K

Working with clients to deliver bespoke technology business solutions for a wide range of industries and business scenarios, this company delivers R&D qualifying projects pretty much every day. The business was so involved in the day-to-day, they didn’t recognise that they were delivering research and development, daily. The company had also invested significant resource into the development of their own technology solution, just seeing it as an internal project needed to improve their efficiency.

Working with a client they recently developed one of the UK’s most advanced smart metering platforms leading to just over £7.5K of R&D tax credits.

Business: E-commerce
Secret R&D:
Resolving Inefficiency
R&D Tax Refund:
£6K

Anecommerce business specialising in sports accessories, developed a specialist shipping integration software to improve inefficiencies in their business processes.Working with a subcontractor, they modified a program to make it more efficient for use within their business. Significant improvements were made to the software program to integrate the software into their systems, and the internal R&D project generated a claim worth £6k over a two year period.

Although the business set out to resolve inefficiencies in their business process, they were too involved in the project to recognise their own work to be innovative.

Business: Scaffolding contractors
Secret R&D:
Save Time & Money
R&D Tax Refund:
£22K
These guys are experts in scaffolding, specialising in the provision of scaffolding installations to a wide range of industries.They had invested in the development of a free-standing scaffolding structure to be used for internal scaffolding, primarily to save their time and cost when setting up jobs.

The company was clueless that what they had set out to do was an R&D project. They just wanted to save themselves time and money! However, in the process they developed a new innovative scaffolding product applicable industry wide and acquired a corporation tax repayment of over £22K for a two year period.

Business: Gastropub & Hotel
Secret R&D: Improve customer experience
R&D Tax Refund: £7K

A Gastropub and Hotel based in the North of England, wanted to provide a menu that catered for all tastes and needs, as they wanted everyone to find something really good on the menu. They knew it didn’t make economic sense to have a dozen different menus, so they worked on a new menu to cater for all dietary requirements.

The gastropub developed an innovative menu that could be produced to cater for vegan and gluten free diets, without compromising on the customer experience.

The owner was convinced there wouldn’t be a claim because it’s just ‘what they do’ but when he reflected on all the hard work that goes into crafting their menus he was able to see the numerous research and development steps in their work.

This work realised an R&D Tax claim of £7k for the gastropub.

Business: Fashion & Apparel
Secret R&D: Sales toolR&D
Tax Refund: £15K

A women’s clothing manufacturer and retailer, developed a unique sports clothing range for pregnant women which they understood would qualify for an R&D claim. However, alongside this they delivered a complex website project which included the development of a global directory of maternity fitness instructors. Developed as a sales tool, the business was completely unaware that they had built something completely new and innovative.

Altogether the R&D projects equalled a total benefit of just over £15K.

Ensuring you identify all the R&D in your business requires a mindset change, and cultural shift to make it work business wide. You have to change the way you think about what you are doing day-to-day. Encourage your employees to constantly challenge the way they – and others – do things, to make suggestions for improvements and bring forward new ideas.

You could be sat on secret R&D gold.


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