Research & Development spend is on the up!

Research & Development: what’s your story?

The Northern Ireland Research & Development Survey published today (17 November) is indicative that more Northern Ireland companies than ever before are either undertaking new R&D activities or simply gaining credit for the work they already do but didn’t realise fell under the R&D umbrella.

We are all encouraged to learn that there has been a 33% increase in R&D expenditure in the SME sector here since 2014. From our experience working with clients, there are still many other businesses in Northern Ireland who are entitled to R&D tax credits but are not yet claiming.

What would R&D tax credits mean for my business?
As well as assisting you to grow your business and maximise your profits in the long term, there is the added tax saving incentive of R&D tax credits: Your company gets relief for qualifying spend of up to 230% of actual costs. This relief is available where your company spends time and money trying to overcome a scientific or technological uncertainty, i.e. where you try to overcome a problem.

What this means is that if you spend £10,000 on qualifying R&D activities, in addition to receiving a tax deduction for the £10,000 that you have already spent, the company will receive a further deduction of £13,000 against its taxable profits for the year. In this example a company with a £20k taxable profit figure would reduce its tax bill from £4,000 to £1,400 by claiming R&D tax credits.

Eligible Costs
The good news about R&D tax credits is that they are not only available for materials consumed in the project but also for utilities, testing costs and employee costs that can be attributed to the R&D activity. R&D capital allowances can also be claimed.

Some examples which we have seen first-hand include:
• Manufacturing companies applying changes to their production process in order to enhance product shelf life whilst maintaining all aspects of product quality;
• Businesses in the food sector making their dishes free from certain allergens but at the same time not impacting on taste.
• Engineering companies modifying machinery in order to reduce waste in the cutting process.

What should I do now?
R&D is open to a wide variety of businesses. To determine if your business is carrying out any R&D activities, consider the following:
• Are you doing anything to make your production process more efficient or environmentally friendly that does not simply involve purchasing a ready-made solution?
• Have you had to modify your product to overcome a particular problem? e.g. mixing materials that work together without a negative reaction.

If you are a limited company (or if you are thinking about incorporating your business) and you think that your business is already undertaking an R&D project, or indeed have an idea for a future project, contact Claire on 028 8772 4697 to arrange a free initial consultation.