Are you missing out on claiming R&D tax relief, or not optimising your claim? Experience has shown that many companies are doing just this, often because they are unsure where to draw the boundaries of eligible activities. The term R&D tends to conjure up academic or blue-sky concepts, but eligible work can extend into many practical fields such as manufacturing, engineering and software development.  Adding to the complications is that only some costs are allowed even when you have identified eligible R&D. These rules can be difficult to interpret, again sometimes leading to under claiming.

To be eligible, a company must have activities which meet the definition of R&D for tax purposes. This has been a thorny area for both the tax authorities and companies, but to cut a long story short it is now agreed that in practice the DTI 2004 guidelines on this can be considered definitive for all years. These guidelines are good, but you do need to read them all carefully; the first page usually confirms the reader’s initial feeling that they are not eligible. The rest of the document then systematically demolishes this view. The essence of the test is that you must be a competent professional in your scientific or technology field and be facing a technical challenge which is not readily solvable using your existing expertise or information in the public domain. Experience has shown that companies often have more eligible activities than they first think, and that you do need to think carefully and objectively about what you do. Many companies make a bad impression on the tax authorities by not presenting their programmes correctly, forgetting that the inspector is often not a technologist and needs things explaining clearly in the language of the guidelines.