Hiya,
That is correct, R&D tax relief can be claimed by a number of industries including manufacturing, software development, engineering and Computer Aided Design. It can also apply to firms who perform R&D to support their primary business. For example a retail firm who develop their own stock control software may qualify.
The HMRC basic rules can be a bit complex but Ill try to give you some pointers.
In order for a work to qualify for R&D tax relief it has to be performed by a limited company and meet the following criteria -
1) It must be project driven
So must have defined goals, a project plan etc
2) Must be seeking an advance in science and/or technology
This basically means you must be trying to do something which either hasn't been attempted before, or which there is limited information about in the public domain. It doesn't have to be unique, so if someone else has already achieved a finished product, but haven't released details on how they achieved this, then work to try and create the same product may qualify.
3) Must be trying to overcome technological or scientific uncertainty
This is the one most people struggle with, what it really means is that at the start of your project there is an uncertainty that one or more of your project goals may not be possible. It cant just be your uncertainty but more of a general industry one.
4) The knowledge couldnt be readily deduced by a competent professional
This ties into number 3 and qualifies that the uncertainty isnt just yours.
What you need for a successful claim is a breakdown of your R&D expenditure and a technical summary which explains to the HMRC what projects you have worked on and why they meet the guidelines for R&D tax relief.
Once you have worked out what you have spent on your qualifying projects (including staff costs, software, electricity etc) then for a corporation tax paying firm it's worth about 20%.
You can claim back for the past 2 accounting periods, so if you paid corporation tax for these periods then you will get a refund from the HMRC and if your claim is worth more than the tax you paid you can either create an additional loss and then carry this forward to use against corp tax liabilities in the future or you can surrender this loss for either 14% or 12.5% cash depending on which year it was.
The technical summary is the most complicated bit and this is the bit my current firm help clients with. The trick is to not make them too complicated as the HMRC generally aren't experts in industry.
Once your accountant has amended your tax return (CT600) to show your R&D expenditure they sent that along with your tech summary and figures spreadsheet to one of 7 HMRC specialist units for processing. Then within about 30 days the HMRC either approve the claim and process your refund (or approve your loss to carry forward), or they open an enquiry which means they either think your figures are a bit high, or want to come and see the work you are claiming is R&D.
I've dealt with a few enquiry's and they aren't actually that bad, but it does help if you have used a specialist firm to help with your R&D claim as they usually attend the enquiry with you and will fully prep you on what to expect, what to say etc.
After the enquiry the claim is either then approved, or rejected.
If you are looking to do your first R&D claim then I would reccomend that you use a specialist firm as they generally work on a "no win, no fee" basis and they will write the technical summary and QA your figures for you, then after you have done a few with them you should be in a position to do them yourself moving forwards.
Hope this helps and please feel free to ask any questions.
Paul
