What qualifies as Research & Development?
Claiming R&D Tax Reliefs can be complex, with change schemes, AIF requirements, technical reports, and HMRC compliance checks to navigate.
Even knowing if you’re eligible to claim to begin with can be challenging.
However, if your business has invested in developing or significantly improving a product, process, or service, your business could be eligible for substantial tax relief, meaning a welcomed injection of capital or a reduced Corporation Tax bill!
We’ve detailed below three examples of qualifying research and development, each with a successful R&D Tax Relief claim, supported by the TC Group Innovation Tax Reliefs team.
EXAMPLE 1 – MOTOR REPAIRS
Alpha Electrics repairs the industrial motors of equipment where the manufacturer no longer offers a repairs service.
Alpha Electrics regular repair new generations of motors, often with previously unseen features and functionality, and no technical assistance from the manufacturer.
The qualifying R&D project aimed to advance technological knowledge, creating a methodology for repairing motors from three specific industrial automation manufacturers.
All three manufacturers sold products in the UK, but had no local repair services. For some of their legacy motors there was no repair available, and for others, it would have to be shipped to Europe for diagnosis and repair at great expense and time. There was no UK-based aftermarket repair alternative, and no specific technical information or equipment was available to guide/assist with the repairs.
This was a significant technical challenge, with numerous uncertainties, particularly when repairing faults of legacy motors that were five to ten years old or more. Faults included motors that appeared dead, others were burnt out, some were not operating correctly as per the control signals sent to them, and others were suffering from the effects of water ingress during machine cleaning.
HOW WAS IT ACHIEVED?
A team of specialists assessed, inspected, and tested numerous aspects of each motor, comparing results and trading knowledge. They trialled proposed fixes until successful, or satisfied that a particular fault in a particular circumstance is unfixable.
OUTCOME
A great number of faults with occur in the motors from these three manufacturers can now be dealt in the UK using Alpha’s repair methodologies.
EXAMPLE 2 – MINING, TUNNELLING AND DRILLING
Cambridge Insitu Pressuremeter Testing uses their proprietary equipment to assess ground and rock solidity and fractures, particularly for mining, tunnelling, and drilling purposes.
The qualifying R&D project aimed to create a method for stress testing exceptionally shallow ground that had already been fractured.
This was a significant technical challenge, with numerous uncertainties, including how to get accurate pressure test results from the ground at 60m – more than eight times shallower than is usual for industry standard testing at 500m.
Additionally, how to compensate for ground that’s already fractured, risking measuring the surface fractures over anything else, and the shallow depth of the test increasing the likelihood of the fractures upsetting the results.
HOW WAS IT ACHIEVED?
Two types of tests, designed for different scenarios, were used with results analysed together to determine a baseline and guarantee accuracy.
OUTCOME
The methodology can now be used going forward when similar scenarios crop up.
EXAMPLE 3 – MANUFACTURING & DESIGN
CJR Propulsion designs and manufactures precision-engineered propellers, rudders, and stern gear packages for a host of leading commercial, leisure, and superyacht brands.
The qualifying R&D project aimed to design, engineer, and manufacture flow-aligned rudders for very high-speed sport fishing vessels > 50-knot speed. An optimised design of rudder could offer a 1+ knot speed increase, could make or break a successful fishing trip or competition.
This was a significant technical challenge, with numerous uncertainties, including how to further reduce water resistance on the rudder, material choice, manufacturing and finishing.
HOW WAS IT ACHIEVED?
Due to client confidentiality, we can’t tell you, but it took a lot of effort and expertise.
OUTCOME
The project was a success. CJR Propulsion can now supply optimised rudders for sport fishing boats that offer a worthwhile speed increase over traditional rudder technologies.
If you’re spending money developing or significantly improving a product, process, or service as well as advancing knowledge, you may qualify for R&D Tax Relief.
download R&D Tax Relief guidelines
To discuss your project, book a free, no-obligation consultation with our Innovation Tax Reliefs team to see if you’re eligible to claim.