The R&D Tax Credits scheme is a government initiative designed to incentivise innovation within the UK. Businesses that undergo Research and Development (R&D) in the fields of science and technology can claim back a percentage of the costs spent on their project.
Costs can be claimed back either in cash or as a Corporation Tax deduction. As of April 2023, businesses can claim back up to 27% of their R and D expenditure.
There are several areas of qualifying R and D expenditure that businesses can claim on, and depending on your sector, the spending proportions in each area will vary.
All types of businesses can claim R&D Tax Relief provided they are innovating in their sector, overcoming challenges and resolving scientific or technological uncertainty. However, there are some of the sectors that dominate the R&D sphere.
Let's take a look at some examples of qualifying R&D for different sectors.
What costs can be claimed back under R&D Tax Credits?
Qualifying R&D expenditure comes under these areas:
Payments to the subjects of clinical trials
For more information about areas of eligible R and D expenditure, check out of blog on which costs can be reclaimed.
Qualifying R&D by sector:
💻 Technology Companies
The technology sector engages in huge amounts of R&D - which is to be expected considering Research and Development sets out to overcome technological uncertainty. This is the case for all sub-sectors of technology, including FinTech, FemTech, and EdTech.
Here are just a few examples of qualifying R&D expenditure a technology company may be utilising:
Integrating AI and machine learning, or enhancing existing software.
Innovating data processing methods and storage technologies (be that through AI or otherwise).
The development of cloud computing.
Enhancing and optimising virtual reality (VR) software within gaming, entertainment, or property listing.
Integrating robotics into digitised systems.
🏗️ Construction
There are many areas of construction that come under qualifying R and D expenditure. The optimisation and innovation of the construction industry is occurring frequently - be that through the development of advanced machinery or the adaptation of existing processes.
Here are some ways the construction industry engages in qualifying R&D:
Innovating, or trialing, novel materials for construction projects.
Integrating new/improved technology into existing buildings.
Adapting existing equipment or construction processes to adhere to new regulations.
Introducing and deploying innovative mechanical and electrical systems into construction projects.
Modifying existing construction components and fittings.
Developing new or advanced equipment for use in current or future construction projects.
👩🔬 Engineering
The engineering sector is characterised by its technological and scientific advancement. Optimising engineering processes and creating innovative designs are stable practices for engineering businesses that all come under the umbrella of qualifying R&D.
These are just some of the ways in which engineering businesses engage in qualifying R&D:
Creating innovative computer numerical control programs.
The development of new construction equipment, or enhancement of existing equipment.
The development of novel heating and air conditioning systems.
Processes involving the use of consumables such as light, heat and power.
Design and development of sustainable energy infrastructure.
Introducing innovative designs for bridges and road structures.
🏭 Manufacturing
Manufacturing is all about development, optimisation, and innovation. As such, it is a very R&D-intensive industry. Whether its tackling supply chain issues, new regulations, or product development, manufacturing companies are almost certainly engaging in Research and Development to some extent.
Here are some of the areas of eligible expenditure that a manufacturing business may be working on:
Development, testing and trialing of new products.
Digitalising processes that were previously manual.
Innovating environmentally-friendly packaging.
Modifying existing manufacturing processes to adhere to changing regulations.
Crafting specialised tools to meet high-specification product designs.
Making mechanical or digital modifications to production lines.
🍕Food Tech
It may not be the most obvious sector for R&D, but Food Tech definitely incorporates R&D in some capacity. As the diet of the consumer changes (think veganism, gluten-free, or any other alternative diet), Food Tech research and development becomes even more crucial.
These are a few of the ways in which the Food Tech industry qualifies for R and D tax credits:
The process of refining sugar-alternative recipes.
The development of sustainably-made meat alternatives.
Manually managing variables within production such temperature and humidity.
Streamlining the diagnosis of medical conditions through innovative testing methods.
Innovating processes of helping produce stay fresh for longer.
🩺Medical
The medical sector is one of the most R&D-dominant sectors of all, and it is for this reason that a huge amount of R&D Tax Credits are claimed by MedTech companies.
Here are some of the main ways in which Medical businesses engage in qualifying R&D activities:
Research and development focused on the discovery of new pharmaceutical drugs.
Innovating devices for administering drugs or monitoring patients.
Conducting clinical trials for novel medication.
Enhancing the speed of process for existing medications.
Streamlining the diagnosis of medical conditions through innovative testing methods.
The R&D Tax Credit Scheme isn't exclusive to specific sectors. There are many different industries that carry out R&D to some extent and are eligible for R&D Tax Relief.
If your business carries out any of the qualifying activities listed above and would like help with your R&D claim, get in touch with one of our experienced R&D Tax advisors.
Our end-to-end process guarantees a completed claim in 3-5 days, ensuring you receive a maximised benefit as quickly as possible.
If you'd like to learn more, explore our R&D Tax Credit service.