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How different sectors qualify for R&D Tax Credits

Updated: May 18, 2023

Research and development (R&D) refers to activities that innovate and introduce new products and services, or improve existing offerings.

The broad nature of this term means that R&D can materialize in countless ways, spanning almost every industry.

Research & development (R&D) Tax Credits are a government incentive, providing innovative businesses with the opportunity to claim back up to 27% of their previous year’s R&D spending.* Naturally, this scheme spurs reinvestment and helps companies scale-up their project, faster.

R&D tax relief has been proven successful in the UK, but considering it was implemented 20+ years ago, uptake is still much lower than what it could be.

And it’s not the case that businesses are turning their nose up at the idea of free funding.

The issue is that many companies are either unaware of the scheme, or don’t know if their project is eligible.

Perhaps, the sweeping ‘R&D’ term is a little too vague.

In this blog, we’ll be breaking down the concept of research and development into tangible examples.

By highlighting real-world research and development expenditure across multiple sectors, you can get an idea of just how many projects could be taking advantage of the r and d tax credits scheme.

🔬 Science & Medicine

Breakthrough medical treatments have seismic effects on societies around the world – think, the successful COVID vaccinations. So, this sector is a more obvious indicator of research & development.

Let’s say a pharmaceutical company based in the UK decided to make their medication easier to swallow. To do this, they try re-engineering a pill coating that’s not currently on the market, and develop methods of compacting the size of medication.

The lengthy and expensive process of trial and error can be supported by R&D Tax Credits, year after year. By using r&d tax relief to enrich their cashflow, this medical project can maintain the momentum needed to get their product to market.

🍴 Hospitality & FoodTech

In the age of reduced meat consumption, plant-based food innovation has skyrocketed. This is just one example of the increasingly prevalent R & D claim within the food and hospitality sectors.

A company aiming to advance meat substitutes by trialing new ingredients or novel methods will likely qualify for research and development tax credits. For example, through research and development, Seabloom has recently innovated ‘tuna-free flakes’ made out of seaweed - that mirror the taste, texture, and nutritional goodness of the real thing.

📦 Manufacturing

Manufacturing is an R&D-intensive industry, with environmental solutions driving innovation. Some examples of manufacturing activities eligible for research & development tax credits are the development of eco-friendly, biodegradable packaging as well as safety testing to determine how flammable prototype materials are - as to adhere UK safety regulations.

🌱 Agriculture

Recent statistics from HMRC revealed that the agricultural sector only accounted for 0.8% of all R&D Tax Credit claims filed under the SME scheme.

Some might view agriculture as rooted in tradition, and therefore resistant to modern technologies. The truth is, research and development within this industry is taking place, but most projects aren’t yet claiming research and development tax credits.

At Claim Capital, we’re on a mission to share how accessible R&D tax relief really is. An example of a qualifying activity within agriculture is the development of new soil management products.

This process involves testing to find a precise ratio of raw components and materials to active ingredients that offer sufficient chemical and physical properties.

🚧 Construction

The construction sector is reliant on continual innovation. Qualifying R&D within construction manifests in various ways, such as the development of a new installation process; the creation of novel, more efficient building materials; advancing structural integrity of public housing, and so on.

📲 Software Development

A more obvious candidate for an r&d tax credit claim is software development. By its very nature, creating novel software requires overcoming a high number of technological uncertainties. Modern software is built on the process of ‘object-orientated programming’, meaning that each program consists of separate modules that integrate in different ways. Some qualifying R&D activity within software development is the integration of software with third-party apps, developing network security, and designing new software modules.

By sharing these examples, we hope to clarify that research and development extends further than laboratories and scientists in white coats.

All sectors can take advantage of R&D tax relief, year after year. Diversifying financial distribution from HMRC will naturally level the playing field for innovation across all industries, which is something we’re passionate about.

Claim Capital holds the technical expertise needed to maximise the size of your claim – leaving no cost missed. If you’re wondering whether you could claim back up to 33% of your R&D costs, get in touch with our specialists.

*These are the updated figures in line with the new legislation announced in the April 2023 Spring Budget.


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