We’re all aware of the importance and benefits of research and development (R&D). It enables us to grow our businesses, to stand out from our competitors and to meet the ever-changing needs of the consumer. It also helps us to attract the best talent and continue to show why Britain is among the top five innovative countries, according to the Global Innovation Index.

We have all of the ideas, and that’s really exciting, but one thing businesses struggle with is how to progress with those ideas, financially. There seems to be a real lack of knowledge and mistrust of the Government’s R&D tax credit scheme, and though we have successfully applied for R&D relief in the past, and will continue to do so, we admit we struggled to get our heads around the process at first.

This got us thinking – there must be so many other companies out there, keen to get some help with research and development but unaware of where to go and confused by the Government initiative. Keen to promote the benefits of the relief, we’ve spoken to businesses up and down the country that have been successful with their claims in the past, plus R&D expert, Jamie Smith. We hope the following case studies make for an inspiring read!

Alastair Williamson, CEO at RanPlan Wireless

Tell us about your business and when it was founded
Ranplan Wireless was founded in 2006 by Professor Jie Zhang as a research company with the intention to conduct research with a focus on wireless communications in buildings and in dense urban areas. In 2012, Ranplan started the development of a suite of wireless radio frequency network planning, simulation and optimisation tools, and launched its first product in 2015.

When did you find out about R&D tax relief?

We were advised by our auditors and tax advisors.

How long have you been claiming R&D tax relief for? How much have you claimed and what has it helped with?

We have been claiming R&D tax credit successfully for 6 years and in total have received over £1m. This tax relief encourages us to hire more developers to carry on research into wireless communications which has led to the advancement of the world’s only tool capable of planning and designing indoor and outdoor networks for dense urban environments in coordination.

Has it helped your company grow as a result?

Research is the epicentre of everything we do. These tax credits have enabled us to continue our research and as a result, increase our R&D headcount year on year. When we started we were 5 staff and operated out of one UK office. Since then we have grown to open an office in China and have recently opened an office in the US to support our customers. To further accelerate growth and address the global market we have also met the requirements to be listed on the Nasdaq in Sweden. None of this would have been possible without the benefit of this form of tax relief.

Would you agree that there is a level of confusion and uncertainty around the topic of R&D, and how to make a claim?

I think the confusion lies around what small companies can claim for as they need to meet certain qualifying conditions, but the process is quite straightforward and is part of the tax return.

Did you encounter any problems yourself when researching R&D tax relief / making a claim?

No. You just need to explain in layman’s terms the nature of the research project, what the researcher was working on, how much time was spent and the outcome.

Did you get any third-party help with your application?

We had help from our auditors and tax advisors.

What measures do you and your team make to continue to ‘innovate’?

Our teams hold regular ‘sprint’ sessions that focus on prioritising research following discussions on the challenges faced by customers, and we also look at emerging trends to anticipate what sort of features they may want in the future.

What advice would you give to SMEs looking to innovate/claim R&D tax relief?

To be truly innovative you must be unique in your line of research.  Network with other similar companies, find out what they are claiming for, carry out research online to see what relief is available.

Aasis Vinayak, Founder and CEO of Fly My Cloud Ltd

Tell us about your business and when it was founded

Fly My Cloud was founded in 2015. We are a technology company, based in London. We believe that all businesses should be able to harness the power and scale of the cloud, no matter the size of the company or what industry they are in.

One of our services focuses on supporting businesses to migrate their applications and data to the cloud by automating the deployment, scaling and backup aspects of the process.

We offer free and paid subscription plans to support this through a process that is quick and easy to set up. This is our flagship offering – known as middleware.sh.

We also provide consultancy in relation to big data and artificial intelligence for businesses large and small, helping them to ‘future-proof’ their businesses.

When and how did you find out about R&D tax relief?

I found out about R&D tax relief from one of my clients, which prompted me to do my own research. R&D tax relief has helped us to plan our growth strategy more effectively and prepare for the future, enabling us to take calculated risks in our investment plans.

Would you agree that there is a level of confusion and uncertainty around the topic of R&D, and how to make a claim?

I believe there is confusion and uncertainty around R&D and what relief can be claimed – people often don’t know what they can classify as an R&D expense.

What advice would you give to SMEs looking to innovate/claim R&D tax relief?

I recommend that anyone wishing to claim this relief seeks the advice of a professional when completing their application. The R&D activity has to be genuine and should be able to demonstrate improvements.

I think that SMEs should take advantage of schemes such as this in order to invest in meaningful, sustainable innovations.

Stuart McClure, Founder and CMO atLove The Sales

Tell us about your business and when it was founded

LovetheSales.com was founded in 2015. In a nutshell, we aggregate every discounted product from hundreds of retailers into one website to make shopping the sales quick and easy. We are like the Just Eat of sales shopping.

When and how did you find out about R&D tax relief?

The R&D scheme was first brought to our attention fully by our accountants during our first year of business, 2015. They were aware that we were building technology that was new, and that it was eligible for the scheme. That said, we were remotely aware of it via various start-up news outlets, just not to the extent to which it could be used – these outlets are a great source of information for new business. The accountants helped us understand fully how it could be applied to what we were doing.

How long have you been claiming R&D tax relief for? How much have you claimed and what has it helped with?

We have developed an AI merchandising tool that allows us to automatically place products into the correct areas of our site and then market relevant products automatically to users as they browse, giving them the best experience of shopping the sales – it ensures they see relevant products, prices, brands etc.

We have a unique challenge as an aggregator in retail. Traditional retailers have teams of employees who handle their merchandising. These teams will input information of the products into their systems by hand. However, we aggregate from hundreds of retailers, and so have millions of products on our site. Merchandising the traditional way is an impossible task for a catalogue of products of that size. To solve this problem, we had to use technical innovation. Because our solution was an advancement in our field of technology, we qualified for the scheme.

We claimed R&D tax relief after our first financial year, 2016, and then again at the end of the next one. We will be claiming for this latest year too, given that we are continuing our R&D efforts. We are only a small team, so our tax relief is only a few thousand each year, but it makes a big difference to the costs of those projects.

Has it helped your company grow as a result?

Without a doubt. Claiming R&D credits has meant we have been able to focus more spending on the technology project so that we can advance it more quickly. We have been able to apply more time to staff, as well as better technology.

Would you agree that there is a level of confusion and uncertainty around the topic of R&D, and how to make a claim?

I think the confusion on this topic is around how to claim, rather than how it works. Most people can get a good understanding of what does and doesn’t qualify from material on the topic. The difficulty is preparing the documentation for the claim. An additional level of complexity is added by companies who support claimants – not all, but some offer little clarity on it so that they can attempt to win the business and take a large commission on the claim. That said, we worked with a very professional organisation who were very helpful with our claim and did not pressure us into working with them for the high commission. In this instance, I would advise people to look around and ensure they have a good partner, should they choose not to claim on their own.

Did you encounter any problems yourself when researching R&D tax relief / making a claim?

No, the process was very easy. This is mainly because of the company we chose to partner with for the claim preparation.

Did you get any third-party help with your application?

Yes, we worked with a partner. We chose to do this initially because of the complexity involved. However, we decided to continue working with them in the second year because we were very busy as a team, and so felt the cost to partner was offset by the fact that we could focus on our day job. Had we been able to spare the time, I think we could have prepared the claim ourselves without difficulty. This is obviously because we had a clearer understanding, having been through the process already.

What measures do you and your team make to continue to ‘innovate’?

LovetheSales.com is a technology business operating in retail, rather than a retailer. To this end, everything we do is based on innovation. Aggregators have very different business models and technology requirements for traditional companies. It is imperative that we use technology to streamline multiple processes. It is this mindset that allows aggregators to succeed. We always consider innovation and new technology solutions before any other way of solving our challenges.

What advice would you give to SMEs looking to innovate/claim R&D tax relief?

The R&D tax relief incentive is a brilliant scheme by the government to keep the UK at the forefront of technical innovation. My advice would be to thoroughly investigate the scheme and how it can apply to your business. There may be immediate opportunities, or you may identify a new opportunity that could be included in your plans because of the relief.

Jamie Smith, Co-founder of DSMRandDTaxCredits

Tell us about your business and when it was founded

DSMRandDTaxCredits was founded in April 2017 by myself Jamie Smith, Darren Moynan, and Paul Donohoe.

Both myself and Darren are chartered tax advisors and have been helping clients with the R&D tax credits process for over 15 years through our own accountancy practice and with our previous employer.

The knowledge we have gained resulted in us starting DSM along with Paul Donohoe who has come on board in a marketing and investing role.

Our goal and the main aim is to provide complete support on R&D tax credits from the beginning to the end of the process. The scheme is massively underused with many accountants not offering a service to take advantage of the R&D scheme.

It’s for these reasons we feel that our general industry knowledge along with the expertise we have in the R&D scheme gives substantial value to any eligible company.

When clients approach your business for R&D tax relief, do they usually find the topic confusing?

Yes, most clients approach us because they find the topic confusing in some way. Just the name ‘research and development’ causes some misunderstanding – people assume that it refers only to work done in a science lab or involves high-level computer technology.

Other clients have almost entirely ruled themselves out because either they don’t have a dedicated R&D department or because they are not inventing an entirely new product. All of these common, incorrect misconceptions put businesses off enquiring altogether, so we’re always delighted when they actually ask us and we can give them the good news!

Of course, further confusion arises as we start working together on their claim. Most commonly, identifying which of their projects are eligible and what costs are applicable to their R&D tax relief claim.

People just don’t realise that they are ‘doing’ R&D. You need to apply an in-depth knowledge of HMRC’s definition of R&D to your business to see which projects fit the criteria. Clients often forget or don’t know, that it’s not their concept of R&D that determines their eligibility, but HMRC’s. To be eligible for R&D tax relief, your project must seek “… to achieve an advance in science or technology through the resolution of a scientific or technological uncertainty….” This has its own layers of meaning that need to be unpicked and matched with clients’ individual businesses.

In terms of costs, it’s not just the materials used to produce a new item that is eligible. This preconceived notion snowballs into people underestimating the value of this tax relief. But there is a whole range of eligible costs, including the proportionate amount of staff expenditure spent on the R&D project. You do have to be familiar with the intricacies of the regulations to ensure that you don’t miss out on any costs you are entitled to.

The main takeaways for our somewhat bemused clients are:

  • You do not have to be inventing a whole new item or process for it to qualify as HMRC’s definition of Research and Development.
  • Your business does not have to be in the scientific or technical sectors. Innovation is pursued in every industry; therefore R&D tax relief schemes are accessible to all business types.
  • Our average claim is worth £49,000 – definitely worth a few hours of your time to check and see which projects are eligible.

In your expert opinion, why is R&D tax relief beneficial?

Obviously, the most important benefit is the amount of money available – around 25p for every £1 you spend on an innovative project. It is a very generous tax relief that can be claimed even if your project fails and/or your company is making a loss. It really is set up in the spirit of innovation and provides substantial sums for our clients to invest in their future.

R&D tax relief is just the best area of tax to work in because there is no downside. If you make an enquiry about your company’s eligibility, the worst news you will get is that your current project isn’t eligible for R&D tax relief.

What advice would you give to SMEs looking to innovate/claim R&D tax relief?

Each element of your R&D tax relief claim must be tackled diligently and accurately, in order to avoid a delay in processing your claim. This includes a ‘technical narrative’, methodology, cost breakdown and the records which provide the supporting evidence. Your future projects will then have administration systems in place to enable, preferable, cumulative record keeping.  

If you haven’t started the actual project, you can get the help you need to have these requirements taken care of from the start.

Do not dismiss your business’s potential eligibility until you have discussed it with an expert. It’s a matter of looking at your business through the prism of R&D regulations, which is notoriously difficult to do when you are in it.

All innovative research and development need money. Applying for R&D tax relief should be a top priority to secure future investment. You are investing in innovation, you are entitled to the money, don’t waste the opportunity.

In addition, it’s crucial to find someone who is properly qualified to handle your R&D tax credit claim. There is no ‘R&D tax relief’ qualification, so you are looking for someone with qualifications as a tax advisor or accountant. You can double check their legitimacy with the relevant governing body, like CIOT, AACA, ICAS and ICAW.

 

Do I qualify for R&D tax relief – A Checklist

  • Jamie identified that you must check off all three of these basic criteria for your business:

    .    A UK registered limited company that is a going concern
    .    Submit GAAP accounts and pay UK Corporation Tax
    .    Independent, not a sub-contractor or part of a bigger company

    For your project to be considered eligible for R&D tax relief, it must:.    Be risking the unknown to make a new product, service or process, or
    improve on an existing one. Sometimes, this is as straightforward as
    tweaking the technology.
    .    Your posed question is not easily answerable by your ‘competent
    professionals’
    .    Have a conclusion detailing the results of your research – it does
    not have to have been a successful project. R&D tax relief is awarded for
    the process, not a successful outcome.If you’ve ticked off everything in these two lists, you’re ready to have a
    conversation about how much your R&D tax relief claim could be worth.

 

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