Pixel

What is R&D?

Gary Green
Gary Green
December 11, 2019

R&D tax credits are an effective way for small businesses to raise money while offering incentives to investors.

We highly recommend R&D tax credits to both businesses and investors. R&D stands for Research and Development.

The Definition of R&D

In the Frascati Manual (2015), published by the Organisation for Economic Cooperation and Development (OECD), R&D is:

  • creative and systematic work
  • undertaken in order to increase the stock of knowledge
  • (including knowledge of humankind, culture, and society)
  • and to devise new applications of available knowledge

This is the internationally agreed standard definition. Therefore, according to the OECD for an activity to be an R&D activity, it must satisfy five core criteria. Namely, the activity must be novel, creative, uncertain, systematic and be transferable and/or reproducible.

Our government is keen to increase total investment in UK R&D and has committed to meet a target of 2.4% of gross domestic product (GDP) invested in UK R&D by 2027.

How R&D is Related to Brexit

This is partly driven by concerns to boost R&D spend after Brexit. The incentives offered by the government to encourage R&D have increased over recent years to help encourage more innovation in the UK. This was reflected in the most recently published figures for 2016 with R&D spending in the UK growing to reach a new record high of £33.1 billion representing 1.67% of GDP.

The R&D tax credits are a valuable tax relief that helps push UK companies to increase spending on R&D activities. The tax credits for doing so can be significant. For tax purposes, the requirements that must be met for R&D to qualify for relief include creating;

  • New processes
  • Products or services
  • Making appreciable improvements to existing ones
  • Using science and technology to duplicate existing processes, products and services in a new way

Do I Need To Have Made a Profit?

In fact, R&D activity can qualify for tax relief even if the project in question failed and both profitable and loss-making companies can benefit from making a claim. Moreover, even the mere investigation of a potential idea could qualify.

R&D tax relief is available on qualifying expenditure and reduces the amount of Corporation Tax payable by profitable companies, allows for a cash credit for loss-making companies, or a combination of the two. The amount of R&D tax relief available depends on the total qualifying spend on R&D activities.

If you'd like to discuss how your company can benefit from R&D, get in touch.

Interested in our services?
Fill in your details and a member of our experienced team will be in touch shortly to discuss your needs.
We adhere to strict GDPR rules and do not reveal or sell your data to any third-parties. For more, please read our Privacy Policy.
Latest Insights
March 4, 2022
An Overview of EIS (Enterprise Investment Scheme) - All You Need to Know

There are several benefits for the EIS, or Enterprise Investment Scheme, to make this an interesting...

March 3, 2022
Tax Relief for Angel Investors: Gary Green's Webinar for Stakeholderz

Key Business Consultants' principal Gary Green spoke with Stakeholderz discussing the SEIS & EIS scheme and...

February 23, 2022
What Are EMI Share Schemes? All You Need to Know

If you are considering awarding shares to your employees, an Enterprise Management Incentive is often the...

January 31, 2022
Payments on Leaving Employment: How to Reduce Your Tax Liability

Normally the process for leaving employment is quick and straightforward but this is not always the...

January 17, 2022
HMRC Investigations: What You Need to Know

Discovering that you are being investigated by HMRC can be very stressful, even if you are...

January 14, 2022
Business Transactions - Guide to Planning and Executing Efficiently

There are some transactions in business that are significant and require substantial forward-planning to be a...

January 12, 2022
Why Employee Equity is an Important Issue For Every Business

Being a business leader is about being willing to embrace innovation and be flexible about how...

January 10, 2022
An Employer’s Guide to Settlement Agreements

If you need to terminate the contract of an employee, a properly drafted settlement agreement can...

January 7, 2022
Taxation of Private Company Shares - What Should You Know?

Many companies opt to reward their employees with shares or options because of the manifold benefits...

View Our latest insights »
Get the latest UK tax & business news and guidance delivered straight to your inbox
We care about the protection of your data. No spam. Unsubscribe anytime.
Copyright © 2022 Key Business Consultants LLP. Reg: E&W OC389322
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram