Which Sectors Claim R&D Tax Credits or R&D Tax Relief The Most?
R&D tax credits scheme initiated in the year 2000 by the government of UK to encourage innovation and global competitiveness. Investment in research and technology involves risk, projects have to face several technical uncertainties and there is the possibility of failure too. There is no immediate benefit involved in most R&D projects that’s why the additional source of R&D Tax credits or R&D Tax relief can be a great source of relief for the innovation businesses.
Over years a large number of companies have been making R&D claims and taking benefit from R&D tax credit schemes. R&D tax credits are accessible to all small and medium-sized enterprises SMEs or large businesses via SME or RDEC scheme respectively. HMRC has been very generous towards R&D claims and it allows businesses to reclaim up to 33% of their qualifying R&D expenditure, whether they are profit or loss-making.
R&D Tax Credits scheme is available across any sector indulged in qualifying R&D projects that are eligible to make R&D claims for. Over the years R&D claims have been increased significantly and R&D tax credits have revolutionised enormous businesses. By June 2020 over 59,265 R&D tax credit claims and £5.3bn of R&D tax relief claims were made for the year 2018-19, which is a huge increase as compared to previous years. This blog provides a glance at various sectors and domains which make the most R&D claims in the UK, it will help you access your eligibility:
1. R&D Tax Credits for the Technology sector
Businesses bringing advancement in technology by creating a new product, upgrading existing service, method or product, developing software or addressing the technological challenge in any way are most likely to be eligible to make R&D claim for R&D tax credits. Biotechnology firms, communication firms, engineering, and architectural firms are also included in the technology sector. Any business investing in bringing out advancement in services such as security systems also inculcates in the technology sector and is eligible to claim for R&D tax credits or R&D Tax Relief.
2. Scientific & Engineering Sector
It won’t be surprising to know that the scientific and engineering sector is on the top of the R&D tax relief claims list. Scientific and engineering firms usually incur multiple qualifying R&D projects such as the development of new products, materials, or processes. Creating new technologies as well as improving the ones that already exist also counts as R&D. Any business investing in bringing out advancement in services such as security systems also inculcates in the scientific and engineering sector and is eligible to claim for R&D tax credits or R&D Tax Relief.
3. Software Development
R&D tax credits for software developing companies are much valuable, that’s the reason that the software industry makes most of the R&D claims. To be eligible to claim R&D tax credit or R&D Tax relief against the software it should be unique and its creation must involve technical uncertainties. R&D Tax relief or credits are awarded even against the failed R&D project which fulfills all the prerequisites of the claim.
Manufacturing is another large sector that has most of the claimants for R&D tax relief and R&D tax credits. The manufacturing sector invests their time and liabilities to come up with innovative new products or ideas. During the process of manufacturing they face technical or scientific uncertainties which are solved by technical experts and then these products are tested before marketing to the public, so in this way, they fulfill most of the prerequisites for an R&D claim. Even if it involves the manufacturing of improved and upgraded existing products or services it is still eligible for the claim.
5. Administration & Support Services
As technological advancement is rapidly taking place, many companies are offering multiple administrative and support services which fall under R&D, that’s why there is a high number of claims from this sector. It inculcates planning, designing, and developing services such as cloud services that fulfill HMRC’s criteria for R&D tax relief claims. HR companies, call centres, rental and leasing firms, and recruitment agencies come under administration and support services which often fulfill prerequisites for the claim.
Many companies are carrying out several R&D projects unknowingly and that’s why they are missing out on such a big benefit of tax reduction or payable credits which can be reinvested for never ending cycle of success. Many other sectors such as wholesale, retail traders, construction, agriculture, forestry, etc. also carry out R&D projects and a number of claims are made by these sectors every year.
Have you made an R&D claim? If no then don’t miss out on these valuable credits or Tax relief which can revolutionise your business and accelerate its growth in a competitive market in no time. Feel free to contact our R&D Tax Credits experts any time and get your project’s eligibility accessed along with fill assistance in the claim process with guaranteed success!