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How UK Life Sciences Companies Can Use R&D Tax Credits to Accelerate Innovation in 2025

The UK’s life sciences sector is powering breakthroughs in biotech, medtech, and digital health but these advancements come with a steep R&D bill. Fortunately, there’s a powerful incentive that can ease the cost of innovation: Research & Development tax credits.

With updated HMRC guidance in place for 2025, it’s more important than ever for innovative life sciences businesses to understand how the scheme works and how to maximise what they can claim.

In this article, we’ll explore how UK based life sciences firms from early-stage biotech companies to contract research organisations can unlock extra funding through the R&D tax relief system.

What Are R&D Tax Credits?

R&D tax credits are a government incentive aimed at encouraging scientific and technological innovation. If your business is registered in the UK and carries out eligible R&D activity, you could:

Pay less Corporation Tax, or

Receive a cash credit if your company is loss-making.

Given how expensive life sciences R&D can be, this relief can make a serious financial impact — especially for pre-revenue firms tackling long development cycles.

Which Life Sciences Companies Can Qualify?

You don’t need to be a major pharmaceutical firm to make a successful claim. In fact, many SMEs are eligible. If your work involves developing novel methods, solving complex scientific problems, or overcoming technical challenges, you may qualify.

Examples of eligible companies include:

Biotech firms working on new molecules, biologics or gene therapies

Medtech manufacturers creating advanced diagnostic or therapeutic devices

Digital health platforms using AI or genomic data in clinical applications

CROs and CDMOs involved in complex formulation or testing

Essentially, if your work couldn’t be solved easily by a knowledgeable professional in your field, it may meet HMRC’s criteria for R&D.

Qualifying R&D Examples in the Life Sciences Sector

To give you a better idea, here are just a few examples of what HMRC may consider eligible activity:

Biotech R&D

Improving compound stability or solubility

Developing new drug delivery mechanisms

Formulating compounds in non-obvious ways

Medtech Innovation

Engineering wearable diagnostics or biosensors

Enhancing testing accuracy or reliability

Meeting tough regulatory requirements through R&D

AI and Digital Health

Building tools for personalised treatment using AI

Analysing genome data to identify disease risk

Integrating clinical records with genomic insights

As long as you’re tackling technical uncertainty — not just using off-the-shelf solutions — your work could count.

Which Scheme Applies in 2025?

Under the new rules, most companies will now use the Merged Scheme introduced in April 2024. But depending on your size and funding situation, there may be exceptions:

SME Scheme (pre-April 2024 accounting years): For companies with <500 staff and turnover <€100m that weren’t grant funded. Offers enhanced deductions or a cash payment.

Merged Scheme (from April 2024): The standard for most businesses in 2025, built around the RDEC model.

R&D Intensive SME Relief: For firms spending 40%+ of total costs on R&D. Particularly relevant to early-stage life sciences companies.

Costs You May Be Able to Claim

Life sciences R&D often spans cross-functional teams, lab equipment, and specialist software. The good news is, many of these expenses can be included in your claim:

Salaries of scientists, developers, lab staff, data scientists

Consumables like reagents, materials, test kits

Early-stage clinical trial costs

Cloud and software costs related to bioinformatics or simulations

Subcontracted work (CROs, CDMOs) under the right structure

Common Mistakes and Pitfalls

Navigating an R&D claim in the life sciences sector isn’t always straightforward. Here are some of the key issues to watch out for:

Lack of Technical Justification: You must clearly define the scientific or technical uncertainties you aimed to resolve. Generic claims won’t suffice.

Grant Funding Conflicts: If your project was funded by Innovate UK or Horizon Europe, your claim may fall under the Merged Scheme rules.

Subcontracting Risks: For R&D work outsourced to CROs/CDMOs, it’s critical to show you retained control over the work and that it took place in the UK.

Whether you’re developing breakthrough cancer treatments, building AI for diagnostics, or trialling new drug delivery systems, R&D tax relief can help your innovation go further.

Book a free consultation today to find out how much you could claim

Learn how to claim correctly and maximise your benefit in our full guide: R&D Tax Credits for UK Life Sciences Sector or read this story on : medium.com

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Top AI Personal Assistants in 2025: Features, Pros & Cons

In the rapidly evolving technology landscape of 2025, AI personal assistants have become indispensable tools for UK startups and businesses driving innovation. These digital companions have transformed from simple voice-activated helpers to sophisticated business partners capable of handling complex tasks across departments.

For companies engaged in research and development, selecting the right AI assistant can dramatically accelerate innovation cycles while potentially qualifying for valuable R&D tax incentives.

The Evolution of AI Assistants: 2023 to 2025

The past two years have witnessed remarkable advancements in AI assistant capabilities. The multimodal revolution has enabled these systems to process and respond to text, images, audio, and video simultaneously — creating truly contextual understanding that mimics human comprehension.

UK businesses have embraced these technologies with particular enthusiasm, partly due to the government’s innovation friendly policies following the 2024 AI Governance Act. The recent amendments to the Digital Markets Act have further expanded what these assistants can legally access and process, opening new possibilities for integration with business operations.

Top-Tier Assistants for Business Innovation

Claude 3.7 Sonnet

Claude 3.7 Sonnet has earned its reputation as the thinking machine for complex business challenges. Its reasoning capabilities allow it to analyse business decisions with remarkable nuance, making it particularly valuable for strategic planning.

Many UK innovation hubs have adopted Claude for its seamless integration with UK regulatory frameworks. However, its knowledge base can sometimes fall short in highly specialised industry contexts, requiring additional training.

The Oxford Innovation Hub recently reported a 32% reduction in decision-making cycles after implementing Claude 3.7 Sonnet, showcasing its practical value for research-intensive organisations.

GPT-5 Enterprise

GPT-5 Enterprise stands out for its advanced multimodal capabilities, making it exceptionally useful for product development teams. Its specialised toolsets for R&D departments have made it particularly popular among London-based fintech startups.

The system excels at generating and evaluating product concepts, but users should be mindful of potential security concerns when handling sensitive intellectual property. Its impressive contextual memory allows for truly collaborative long-term projects, remembering specific details across months of interaction.

Anthropic’s Claude Code

For technology-focused startups, Anthropic’s Claude Code has revolutionised software development cycles. This specialised assistant can generate, review, and refactor code with remarkable accuracy, significantly accelerating development timelines.

Companies throughout the Cambridge tech corridor have reported 40–60% improvements in coding efficiency after implementation. However, businesses should account for the learning curve non-technical team members face when collaborating with this highly specialised tool.

Gemini Ultra Advanced

Google’s flagship assistant offers unmatched multimodal reasoning and synthesis capabilities, making it particularly valuable for market research applications. UK creative industries have found Gemini exceptionally useful for identifying emerging trends and consumer behaviours across multiple data formats.

While its capabilities are impressive, the cost structure can present barriers for early-stage startups. UK businesses must also carefully consider the data privacy implications, particularly regarding information storage locations and cross-border transfers.

Pi 3.0 by Inflection

For customer facing applications, Pi 3.0 offers conversational depth that creates genuinely helpful interactions. Its natural language processing capabilities enable nuanced understanding of complex queries, making it ideal for customer service applications.

UK healthcare startups have been particularly quick to adopt Pi 3.0, with several reporting significant improvements in patient engagement. The system’s UK specific data residency options also make it attractive for companies handling sensitive information.

Implementation Strategies for UK Startups

Before selecting an AI assistant, UK startups should thoroughly assess their organisational readiness. This includes evaluating existing technical infrastructure, team capabilities, and potential integration challenges with legacy systems.

Building a solid business case requires identifying specific pain points these systems can address. For R&D focused companies, this might include accelerating research processes, improving data analysis, or enhancing collaboration across specialised teams.

Training requirements should not be underestimated. Even the most intuitive systems require familiarisation, and businesses should budget time and resources for proper onboarding.

The R&D Tax Relief Connection

For innovative UK businesses, the implementation of advanced AI assistants often qualifies for R&D tax relief. These tools frequently support precisely the kind of “appreciable improvement” in science or technology that HMRC recognises in its R&D tax credit scheme.

When documenting your R&D activities, be sure to highlight how your AI assistant implementation:

Addresses technical uncertainties in your field

Involves experimentation and testing

Creates new processes or significantly improves existing ones

Generates technical knowledge that advances your industry

The 2024 expansion of R&D tax relief eligibility criteria specifically mentions AI implementation as a qualifying activity when it involves adaptation and integration challenges.

Future Trajectory: What’s Coming by Late 2025

The UK AI landscape continues to evolve rapidly. We anticipate significant advancements in cross assistant integration, allowing businesses to create custom ecosystems of specialised tools rather than relying on a single solution.

The UK’s AI governance framework is actively shaping development priorities, with particular emphasis on explainability and fairness. This regulatory environment actually provides UK businesses with competitive advantages in developing responsible AI applications.

Taking Action: Next Steps for UK Innovators

If your business is conducting R&D and hasn’t yet implemented advanced AI assistants, now is the time to act. Begin by:

Conducting a thorough needs assessment across departments

Identifying specific R&D workflows that could benefit from AI augmentation

Testing limited implementations of 2–3 different assistants

Documenting all implementation challenges and solutions for R&D tax claims

Consulting with an R&D tax specialist to ensure proper documentation

The right AI assistant can transform your innovation capabilities while potentially generating significant tax savings. With the current R&D tax relief rates at their most favourable level since 2018, the financial benefits of implementation have never been more compelling.

Don’t miss this opportunity to accelerate your innovation journey while taking full advantage of the tax incentives designed to reward precisely this kind of technological advancement. Your future competitiveness may depend on it.

Source: https://medium.com/@alexander_clifford/top-ai-personal-assistants-in-2025-features-pros-cons-ff0f57fd270a

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R&D Tax Relief Eligibility Guidelines

As the UK R&D tax relief program reaches its 25-year milestone, HMRC is introducing major modifications to the claims process. These policy updates bring forth new eligibility requirements that businesses must navigate. In this article, we examine the 2025 R&D tax credit eligibility framework, including the effects of the merged scheme and ERIS, alongside qualifying expenditures and eligible costs.

Eligibility stands as the cornerstone of any successful R&D claim. Missteps can result in financial penalties. Finding clear guidance on R&D tax credit eligibility has typically been difficult — but not anymore.

To streamline your claims journey, we’re providing essential information to help you determine if your project meets the relief requirements.

Overview of UK R&D Tax Credits

R&D tax credits represent a government initiative designed to promote innovative research and development activities. This program aims to stimulate business investment in scientific and technological advancement, ultimately strengthening the UK economy.

Core Eligibility Requirements for R&D Tax Credits

The fundamental eligibility criteria for R&D tax relief are clear and apply to innovations across all sectors, except advancements in arts, humanities, or social sciences (including economics). To qualify for R&D tax relief, businesses must:

Operate as a UK registered entity subject to corporation tax

Conduct a research and development project addressing scientific or technological uncertainties

Face challenges that cannot be readily resolved by industry professionals

Ensure R&D activities directly relate to the company’s commercial operations

If your organisation and project fulfil these conditions, you likely qualify for the relief.

Scheme Specific Eligibility

Your claim must be submitted under one of these specific schemes, each with distinct eligibility parameters:

SME Scheme

Qualifying criteria:

Workforce below 500 employees

Annual turnover under €100 million or balance sheet below €86 million

Accounting period commencing before April 1st, 2024

RDEC Scheme

Qualifying criteria:

Workforce of 500+ employees

Annual turnover exceeding €100 million

Accounting period commencing before April 1st, 2024

The Merged Scheme

Qualifying criteria:

Profit-generating SME or large enterprise

Accounting period starting on or after April 1st, 2024

Enhanced R&D Intensive Support (ERIS)

Qualifying criteria:

Loss-making SME

R&D expenditure representing at least 30% of total spending (including connected company expenditure)

Accounting period starting on or after April 1st, 2024

Qualifying R&D Activities

While your R&D project may meet eligibility standards, only activities directly contributing to resolving technical uncertainties qualify for relief. Administrative tasks, for instance, cannot be included in your R&D claim.

To assess activity eligibility, determine if they involve:

Creating or substantially enhancing a product, process, service, or software solution

Addressing technical challenges where solutions aren’t readily apparent

Employing methodical approaches to develop innovative solutions

Extending scientific or technological knowledge beyond standard engineering practices

Eligible Expenditure for R&D Tax Relief

After confirming your qualifying activities, you can identify eligible expenditure. Remember that only costs directly linked to qualifying activities can be claimed. Eligible R&D expenditures include:

Personnel costs (salaries, wages, employer NIC, and pension contributions for staff directly engaged in R&D)

Externally provided worker (EPW) expenses

Subcontractor fees

Materials and consumables (including supplies and certain utilities)

Software expenses (applications used in R&D processes)

Prototype development (excluding those intended for commercial sale)

Clinical trial volunteer expenses

Data licensing and cloud computing service costs

Mathematical expertise (such as contracted PhD-level mathematicians)

Accuracy in identifying qualifying expenditures and activities is essential for HMRC compliance.

Professional Assistance with Your R&D Claim

Consider engaging with R&D specialists who can guide you through the claims process, ensuring maximum benefit while maintaining full HMRC compliance.

For comprehensive information on R&D tax relief eligibility, visit the source at: https://alexanderclifford.co.uk/blog/rd-tax-relief-eligibility-criteria-2025/

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Funding Pharmaceutical Innovation with UK R&D Tax Credits

Driving Medical Advancements with R&D Tax Relief

Medical innovation is at the heart of modern healthcare, enabling groundbreaking treatments and life-saving therapies. However, the rising costs of research, clinical trials, and regulatory compliance make it challenging for pharmaceutical companies to push boundaries. Fortunately, UK businesses investing in pharmaceutical R&D can benefit from tax relief schemes designed to alleviate financial pressure and encourage further innovation.

In this article, we explore how pharmaceutical R&D tax relief supports medical advancements, the impact of innovation on healthcare, and how businesses can successfully claim these valuable incentives.

Understanding Pharmaceutical Innovation

Pharmaceutical innovation encompasses the development of new medicines, treatments, and medical technologies. The innovation process involves research, clinical testing, and regulatory approvals to ensure new products are safe and effective.

Types of Pharmaceutical Innovation:

Incremental Innovation: Enhancing existing drugs and treatments through research and development.

Radical Innovation: Transformative breakthroughs that introduce entirely new solutions to healthcare challenges.

Why Pharmaceutical Innovation is Crucial

Medical advancements not only improve patient outcomes but also reduce the burden on healthcare systems. A prime example is the development of weight loss medication, which helps mitigate obesity-related diseases like diabetes and heart conditions. The NHS reports that obesity-related hospital admissions reached 1.2 million in 2022/23, costing an estimated £700 million annually.

By investing in innovative treatments, healthcare providers can reduce long-term costs while improving public health. However, these innovations come at a high price, making funding solutions like R&D tax credits essential.

A Brief Look at Pharmaceutical Industry Evolution

The pharmaceutical industry has seen remarkable progress over the centuries, with key innovations shaping modern medicine. Here are some milestone breakthroughs:

1928 — Penicillin: Alexander Fleming’s discovery led to the first widely used antibiotic.

1955 — Polio Vaccine: Jonas Salk developed a vaccine that eradicated polio in many countries.

1975 — Monoclonal Antibodies: A revolutionary method for targeted therapies.

2020s — mRNA Vaccines: Rapid COVID-19 vaccine development demonstrated the power of genetic research.

These advancements highlight the importance of continued investment in pharmaceutical R&D to drive progress in healthcare.

Emerging Trends in Pharmaceutical R&D

As technology advances, the pharmaceutical industry is evolving with it. Some of the latest trends shaping the sector include:

AI-Driven Drug Discovery: Artificial intelligence accelerates the identification of potential new drugs.

Precision Medicine: Customised treatments tailored to individual genetic profiles.

Regenerative Medicine: Stem cell therapy and gene editing techniques (e.g., CRISPR) are revolutionising treatment options.

Challenges in Pharmaceutical R&D

Despite the potential, pharmaceutical innovation faces several obstacles:

Antibiotic Resistance: Overuse of antibiotics is reducing their effectiveness.

Clinical Trial Complexity: Finding diverse participants and securing funding remains a hurdle.

High R&D Costs: Developing a new drug can cost £1.5 billion, according to the Association of the British Pharmaceutical Industry (ABPI).

Funding Pharmaceutical R&D in the UK

Pharmaceutical R&D is expensive, but several funding options can help UK businesses offset costs:

Innovate UK Grants

Biomedical Catalyst Fund

National Institute for Health and Care Research (NIHR) Grants

Wellcome Trust Funding

R&D Tax Credits

Each of these funding opportunities has different eligibility criteria, making research essential before applying.

Claiming UK R&D Tax Relief for Pharmaceuticals

The UK government offers R&D tax relief to encourage innovation, but strict compliance with HMRC’s guidelines is necessary. Here’s how to ensure a successful claim:

Eligibility Criteria:

According to HMRC, an R&D project must aim to “seek an advance in a field of science or technology by resolving scientific or technological uncertainty.”

For pharmaceutical R&D, this means projects should focus on achieving advancements that experts in the field cannot easily solve.

Qualifying Costs:

Eligible expenses include:

Salaries for R&D staff

Lab equipment and consumables

Software licences used in research

Subcontractor costs

Clinical trial expenses

Data analysis and mathematical research

Maximising Your R&D Tax Credit Claim

To ensure an accurate and compliant claim, consider these best practices:

Maintain Detailed Records: Keep all financial and research documentation organised.

Work with R&D Specialists: Tax credit consultants can help maximise claims and ensure compliance.

Understand Qualifying Activities: Ensure projects align with HMRC guidelines to avoid disputes or audits.

Partner with Experts for R&D Tax Relief

Navigating the complexities of R&D tax relief can be challenging, but partnering with experienced consultants ensures accuracy and maximisation of your claim. At Alexander Clifford, we specialise in helping businesses secure the funding they deserve.

Don’t let innovation go unfunded — get in touch today to explore your pharmaceutical R&D tax relief options!

Source: https://alexanderclifford.co.uk/blog/pharmaceutical-rd-tax-relief-uk/

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What is R&D in Business? Key Facts to Know

Innovation is transforming the way businesses operate, but as many invest in cutting edge science and technology, some are left wondering “what is R&D in business?” Well wonder no more, as today we’re talking about the facts you need to know about R&D in business, including who does R&D, and how to source funding for UK based research and development.

In the age of innovation, those who produce the swiftest, most cost effective technologies sit atop the throne of the business world. As new inventions improve competitive advantage and enhance profitability, many businesses are investing in their creative ideas that could change the face of their industries. 

How do they do it? 

It’s simple. They invest in research and development that brings their ideas to life – and you can too with this simple introduction to R&D in business. 

What is R&D in Business?

R&D in business is the process of investigating new ideas, technologies, and methods to create or improve products, processes, software and services. The process of research and development is often the foundation of breakthrough innovation, and can significantly enhance business growth strategies. 

Who Does R&D?

Research and development is no longer reserved for big tech companies and scientists. Truth is, some of the biggest innovators immersed in research and development include: 

Small businesses

Startups

Large businesses

Research institutes

Charities

Businesses investing in innovative projects span across an array of industries including agriculture, construction, energy, engineering, finance, pharmaceuticals and manufacturing.

Key Benefits of R&D in Business

Cultivating innovation through research and development can have some major business benefits. Some of the key benefits of R&D in business include:

Improves service delivery

Gives businesses a competitive edge

Contributes to market growth

Drives long term profitability

Additionally, businesses that use their research and development to form revolutionary processes will usually find that daily operations become more efficient. This can improve staff productivity and morale, leading to a greater reputation as a business. 

Key Considerations for R&D Success

To ensure that research and development contributes to business success, there are a number of things that leaders can implement. These key considerations for R&D success include:

Strategically align projects with business objectives

Build a strategic project management plan

Invest in high skilled employees with diverse expertise

Consider partnering with research institutions or other companies

Optimise resource allocation

Form a clear commercialisation strategy

By following these suggested actions businesses can align their projects with business goals, while maximising the return on investment. 

Funding for R&D in Business

Funding research and development can be incredibly challenging – especially for smaller businesses. Thankfully, there are a range of innovation funds in the UK that specifically support the advancement of science and technology. Funding for R&D in business includes: 

Catapult Network funding

Horizon Europe Programme

UKRI Future Economy fund

Knowledge Transfer Partnership (KTP) funding

R&D Tax Credit Relief fund

Qualifying for R&D Tax Credits

Operated by HMRC, the R&D tax credit relief requires businesses to meet a number of eligibility criteria in order to receive financial support. Now, this relief works by providing businesses with tax deductions, meaning claimants must be liable to UK corporation tax. 

Those looking to claim must also be overseeing research and development that aims to overcome a technical uncertainty in the field of science or technology. This uncertainty should not be easily solved by a competent professional in the field. 

Businesses meeting these requirements can receive a portion of their qualifying costs, but they must ensure that their R&D claim meets HMRC compliance standards.

Claiming R&D Tax Credits with Alexander Clifford

At Alexander Clifford, we’re proud to be one of the UK’s leading R&D tax credit advisories. Our team has a deep understanding of HMRC’s eligibility criteria and policies, ensuring you get the support you need to maximise your claim.

We combine technical proficiency with a genuine passion for innovation, working closely with businesses like yours to uncover qualifying activities and costs that are often overlooked.

That’s how we’ve submitted over 2,400 successful R&D tax credit claims, securing more than £83 million in tax relief for our clients.

That’s what makes Alexander Clifford your trusted choice for R&D tax credits.

Has your business been involved in innovative research and development? Don’t miss out on the funding you’re entitled to!

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Is Your Electronic Payment System Eligible for R&D Tax Relief?

The time of cash is over thanks to electronic payment technology system advancements, but do HMRC recognise innovation in electronic payment systems as qualifying research and development?

We examine the world of financial technology, from the latest advancements to future innovation trends, to reveal the truth about whether your electronic payment system is eligible for the UK’s R&D tax relief.

As the world adopts a more digital way of living, the demand for electronic payment systems has been exceptionally high. This has led to fast paced innovation ranging from biometric security to voice commanded payments.

With businesses pouring time and money into improving electronic payment systems, we’re on a mission to help them receive a return on their investment with R&D tax relief — the innovation fund that supports advancement in science and technology.

So let’s determine whether your electronic payment system (EPS ) qualifies.

What is an Electronic Payment System?

An electronic payment system (EPS) is an alternative payment method to cash transactions, and operates by digitally transferring funds.

Although EPS technology was first introduced when Visa unveiled the first credit card terminal in 1979, it took a while for industry leaders to invest in innovative advancement in EPS’s.

Following the B2B boom in electronic transactions in the early 1980s, here is a brief timeline of EPS advancement:

1994: Launch of online payment capabilities Visa successfully make the first online payment, and First Virtual Holdings launches an online payment system for online credit card transactions

1999: Online transactions made more secure The launch of Paypal allowed consumers to make online purchases without sharing their credit card information with businesses

2007: Contactless transactions are introduced Near field communication technology set the stage for contactless payments, and Barclays released the first contactless card in the UK

2011: Mobile payments made possible With Quickpay and Google wallet launches, consumers are able to make wireless transactions via their mobile phones

2012: Launch of wearable payment technology Barclaycard releases the PayBand, a wristband that allows consumers to pay without the use of card, cash or phone, paving the way for further wearable technology integration

The fact that advancement in EPSs really started to make waves after 1999 is a testament to how the internet has influenced the way we pay.

Innovation in Electronic Payment Systems

Innovation in Electronic Payment Systems has driven significant advancements in digital transactions, enabling businesses and consumers to embrace cashless payments seamlessly. With constant developments in fintech innovation, these systems now cater to diverse needs, offering enhanced security, speed, and convenience. As organisations explore new ways to streamline processes, the adoption of advanced payment technologies has surged.

Back in 2020, a large portion of the world went cash free for the first time. With more people relying on EPSs than ever before and the limitations on contactless transactions removed, opportunities for further innovation were revealed.

Some of the current key areas of innovation for electronic payment systems include:

Enhanced security The development of fraud detection algorithms, encryption protocols and blockchain based solutions, aim to protect EPS users and their data

Improvements in user experience By frequently updating contactless payment solutions and incorporating them with seamless app development and technology integrations, EPSs are made more accessible

Speed and scalability

By developing new systems capable of handling high volumes of transactions with minimal speed, EPS transactions are made more efficient

With enhanced focus on these areas of innovation, the way we use EPSs has transformed over recent years.

Combining convenience with easy tracking, biometric authentication and automated transaction notifications have quickly become the key to managing our everyday expenditures — but this kind of advancement takes a lot of trial and error throughout significant research and development phases.

Introduction to R&D Tax Relief

The R&D tax relief (also known as R&D tax credits) is a government fund that incentivises businesses to invest in research and development.

Its aim?

To reduce the costs of scientific and technological innovation, and in turn, inspire an advancement in knowledge that helps to position the UK as a leader in innovation.

R&D Tax Relief Eligibility

As per HMRC’s guidelines, research and development is defined as a project that seeks to overcome a technical uncertainty in the field of science or technology, that a competent professional in the field could not solve. The project must also aim to produce a new or improved:

Product

Software

Service

Process

While the R&D tax relief provides qualifying projects with a quick return on investment, only a portion of the costs associated with research and development may qualify for the tax credits. Qualifying costs include:

Direct staff costs (including PAYE, NIC and pension contributions)

Software costs

Prototype development costs

Consumable items (including materials and some utilities)

As this is a form of tax relief, businesses looking to claim R&D tax credits must also be liable to corporation tax.

Benefits of R&D Tax Relief for the Payment Industry

On top of direct benefits for your business, your innovations strengthen the economy, and help to position the UK as a leader in financial technology (fintech). This efficient way of supporting businesses that take on challenging projects, while providing an economic boost, is why R&D tax relief is a reliable source of innovation funding.

Is Your Electronic Payment System Eligible for R&D Tax Relief?

Research and development projects that focus on producing or enhancing electronic payment systems typically fall under the category of technological innovation. By default, this means that you’re already half way to qualifying for R&D tax relief!

You next need to address the technical uncertainty that your EPS project aims to overcome, and what is required to solve the problem. You can do this by answering each of the following questions:

Is there a lack of solution or existing knowledge to the problem you’re aiming to solve with your project?

Is a competent professional in the field unable to solve the problem?

Is research and development necessary to solving the problem?

If you confidently said yes to each of these questions, then your project may be eligible for R&D tax credit relief.

Before you jump into making a claim, it is recommended that you consult with an R&D tax credit advisor, as they have a deeper understanding of the criteria that your project must meet in order to qualify.

How to Maximise R&D Tax Relief for Payment Systems

To maximise your R&D claim is to take a strategic approach to identifying qualifying activities and costs in order to make the most of the relief while maintaining compliance with tax regulations.

The best way to maximise your R&D tax relief requires following a simple plan that may also coincide with your project mapping phase. Your R&D tax relief plan should look like this:

Keep up to date with HMRC’s R&D policy Being aware of changes to policy or guidelines can help ensure your project remains eligible for the relief

Strategically allocate funding If you have additional research and development funding such as grants, allocating these finances to costs that aren’t eligible for R&D tax relief can help to reduce expenditure and increase tax credits

Document each stage of the project By keeping detailed documents of each stage (including challenges you face in the project), you’ll be able to identify qualifying activities

Categorise your costs Keeping your research and development costs separate from daily operations costs can make identifying your eligible expenditure easier, especially if you categorise each of the costs involved in the project

Work with R&D tax credit advisors People specialising in R&D tax relief have a working knowledge of R&D compliance, and are therefore able to assist in producing a well rounded claim that adheres to the latest tax regulations

How Alexander Clifford Can Help

At Alexander Clifford, we pride ourselves on being one of the UK’s leading R&D tax credit advisories. Our team has in depth insights into the latest R&D policies and legislation, ensuring you’re always in safe hands.

We’re meticulous when it comes to uncovering qualifying activities and eligible expenses that others might overlook, helping you receive the full potential of your R&D tax credit claims.

With over 2,400 successful claims and counting, our track record speaks for itself.

That’s why businesses trust Alexander Clifford to deliver expert advice and exceptional results when it comes to R&D tax credits.

Ready to experience our 5-star service? click here to book an appointment with one of our specialist advisors today!

Source: https://alexanderclifford.co.uk/blog/electronic-payment-system-rd-tax-relief/

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R&D Tax Relief Example: Who Can Claim?

Have you been wondering how R&D claims work? We took our professional insights of HMRC policy to explore what the relief is, who can claim R&D tax credits, and an exclusive look at an R&D tax relief example to show you what goes into a successful claim.

With the ability to mitigate financial risk while providing support for cutting edge projects, the R&D tax relief has sponsored some of the greatest innovations in science and technology in the past 25 years. Could your research and development project be next?

Find out in our mini dive into R&D tax credit claims, complete with an R&D tax relief example of a successful claim!

What is R&D Tax Relief?

In 2000, the British government began their plan to position the UK as a global hub for innovation, by strengthening the economy through scientific and technological growth. In order to do this, they knew that innovation should not be limited to people in lab coats, but should be extended to businesses that understand the limitations of their own industries.

This is where the idea of R&D tax relief was conceived.

For the past 25 years, R&D tax relief has been a form of innovation funding that provides businesses with the opportunity to offset a portion of the cost invested in qualifying research and development.

The Benefits of R&D Tax Relief

Successful claimants often encounter an array of significant benefits that support their businesses and their projects. Some of the benefits of R&D tax relief include:

Reductions on corporation tax

Improved cash flow

Fewer financial risks in relation to research and development

Who Can Claim R&D Tax Relief?

One of the greatest things about the R&D tax relief, is that pretty much any business can claim, as long as they are:

Liable to UK corporation tax

Undergoing a science or technology based research and development project

It’s important to remember that HMRC has a specific definition of research and development that states: the project must aim to overcome a technical uncertainty in science or technology that could not be readily solved by an expert in the field.

Who Cannot Claim R&D Tax Relief?

As long as the business and its project meets the qualifying criteria above, they are able to make an R&D tax relief unless the advancement is in one of the following fields:

The arts

Humanities

Social sciences (including economics)

Qualifying R&D Activities

HMRC’s definition means that qualifying research and development projects should be made up of activities that directly help to solve the scientific or technological uncertainties.

To highlight how activities can be used to help overcome the uncertainty in a research and development project, here are a few examples of qualifying R&D activities

Creating a new software platform with unique capabilities that’s required for overcoming technical challenges

Enhancing the efficiency of a manufacturing process by designing and testing new methods to reduce waste

Building and testing prototypes of a new medical device to ensure it meets safety and performance standards

R&D Tax Relief Example: Making a Successful R&D Claim

Imagine if you will, a tech startup that’s developing a smart energy monitoring system. The team faces significant challenges in creating algorithms to optimise usage in real time, resulting in a technical uncertainty around data processing and device integration.

Upon the completion of their project, this is how the tech company would go about making a successful R&D claim:

Identified qualifying activities From coding to testing, the startup uses HMRC’s guidelines to identify qualifying activities

Compiled documentation Throughout the course of the project, technical documents were kept and can now be used to support the claim

Identified eligible expenditure Using financial documents kept throughout the project, the startup highlights all qualifying costs

Calculated worth of the claim Using an R&D tax credit calculator, the startup works out how much they could receive from the relief

Worked with an R&D tax credit specialist To ensure the claim is compliant by HMRC standards, the startup sought the services of professionals who identified additional activities and costs

By approaching their R&D claim this way, the startup was able to maximise their claim, and reinvest their savings into further innovation.

R&D Support with Alexander Clifford

At Alexander Clifford, we’re passionate about helping innovative businesses like yours make the most of R&D tax credit relief.

As one of the UK’s top R&D tax credit advisories, our specialist team knows HMRC policy inside and out, and we’re here to ensure every qualifying activity and cost is accounted for, maximising your claim with precision and care.

Our proven approach has already helped clients secure over £83 million in tax credit benefits, and we’re ready to do the same for you.

Don’t let your innovation go unrewarded. Get started today by schedule an appointment.

Source: https://alexanderclifford.co.uk/blog/rd-tax-relief-example/

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How a Stakeholder Management Plan Simplifies R&D Tax Relief

Compiling an R&D tax relief claim can be challenging for businesses, but can an effective stakeholder management plan ease the process? Join us as we navigate the benefits of leaning on stakeholder management plans to simplify R&D tax credit claims, and discover our top tips to improve your R&D process with an actionable plan.

From documenting eligible activities to ensuring HMRC compliance, compiling an R&D tax relief claim can be complicated, and without a clear strategy, it’s easy to make mistakes or miss deadlines.

This is where a stakeholder management plan could simplify the claims process. By aligning documentation efforts and managing deadlines, this form of planning ensures that teams work in tandem to maximise the outcome of R&D relief.

This is how it works…

What is a Stakeholder Management Plan?

A stakeholder is someone who has an interest in a business’s activities. This could range from employees involved in daily operations, to external parties such as customers or organisations with a vested interest in the success of the business.

A stakeholder management plan on the other hand, is a strategy designed to manage and address the interests of stakeholders that may be involved in a specific project.

This ensures that the interests of the stakeholders are understood, leading to a seamless collaboration that aligns various goals and objectives throughout the length of the project.

Key Components in a Stakeholder Management Plan

When producing a stakeholder management plan, there are four key components that may result in its successful implementation:

Identify stakeholders Recognise those with a vested interest

Stakeholder engagement Establish communication with stakeholders

Duty assignment Assign roles to stakeholders involved in the project

Response system Ensure stakeholder duties are completed and implemented

Importance of Including R&D Tax Relief in a Stakeholder Management Plan

In the context of R&D tax credit relief, the term stakeholders may include teams such as:

Finance

Project management

Research and development team

Consultants

As a form of innovation funding provided by the British government, R&D tax credit claims require coordination between stakeholders, to compile accurate documentation and meet submission deadlines. Having a stakeholder management plan in place may improve R&D compliance, reducing the possibility of receiving an enquiry.

How a Stakeholder Management Plan Simplifies R&D Relief

An R&D tax credit claim has the ability to reinforce innovation throughout business plans, but the process of compiling a claim can be time consuming without adequate organisation.

With a strategy that organises all parties participating in research and development, stakeholder management plans are able to simplify the claims process by achieving these goals:

Unifying stakeholders Stakeholder alignment becomes possible with a stakeholder management plan, which directs everyone’s attention to a common goal

Improving communication As one of the core components in a stakeholder management plan is the response system, the plan acts as a resource that improves communication and minimises miscommunication

Certifies roles and responsibilities By delegating tasks, the stakeholder management plan will reduce duplicated duties or gaps in responsibility, while holding individuals and teams accountable for specific tasks

Reduces risks Proactive development of a stakeholder management plan ensures that required and additional documentation is accounted for, reducing the risk of facing an enquiry

Helps maximise R&D tax relief benefits With various stakeholders focusing on single aspects of the claim, there’s an opportunity to ensure that qualifying activities and expenditures aren’t missed, which improves the claim benefit

To ensure compliance, HMRC advises businesses to consult with R&D tax credit specialists. As external teams with a vested interest in the success of the R&D claim, these specialists can be incorporated into the stakeholder management plan, with duties such as:

Verifying qualifying activities and costs align with the latest HMRC policy

Effectively compiling documentation

Composing technical narratives that solidify your claim

Liaising with HMRC on your behalf to ensure deadlines are met

5 Tips to Improve R&D Claims With a Stakeholder Management Plan

Now that we’ve established how a stakeholder management plan can simplify the process of claiming R&D tax credit relief, we want to share how you can build an effective stakeholder management plan that — when put into practice — unifies your team throughout the course of a research and development project.

So without further ado, these are the top 5 tips to preparing a successful R&D claim with a stakeholder management plan.

Identify stakeholders ahead of time

During the process of project mapping, it’s important to take into account the people involved in the R&D tax credit process. This includes internal teams such as finance and R&D teams, as well as external teams such as R&D advisors.

Early stakeholder identification can help assess the involvement of each individual.

Set clear objectives

Goal setting will help to determine the R&D objectives that guide stakeholder engagement, while helping them to prioritise specific tasks. Goals can include maximising eligible costs or compliance focus.

Build a communication strategy

A solid communication plan can enhance team collaboration, while ensuring that stakeholders are aware of their deadlines for R&D claim submissions. Using project management tools and software can be detrimental to this process.

Assign roles and responsibilities

Effective task allocation can provide stakeholders with role clarity throughout the compilation of an R&D tax credit claim. An example of assigning roles and responsibilities can look like this:

Finance team track expenses and compile financial records

R&D team keep up to date documentation on project activities

R&D tax advisors compile and submit final claim

This form of task assignment can improve collaboration and build an accountability framework.

Monitor and adapt processes

By regularly reviewing the stakeholder management plan, it is possible to implement adaptive management techniques that ensure each team remains aligned throughout the project — even as it evolves with different challenges and changes to tax policy.

This provides an environment of continuous improvement.

Alexander Clifford’s Role in an R&D Focused Stakeholder Management Plan

As one of the UK’s leading R&D tax credit advisories, the team at Alexander Clifford is an effective stakeholder in your R&D tax credit claim process.

Providing specialist knowledge of the latest R&D policy, our team lends their meticulous attention to detail to maximising claims while maintaining the highest standard of compliance. So far, this has allowed our team to submit over 2,400 successful claims on behalf of our clients, securing over £83 million in R&D tax credit relief.

That’s what makes Alexander Clifford your trusted choice for R&D tax credits.

Source: https://alexanderclifford.co.uk/blog/stakeholder-management-plan/

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R&D Tax Credit A Practical Guide To Maximise Your R&D Claim

Looking to understand R&D relief? We’ve got you covered with our complete practical guide to maximise your R&D claim. Delve into the history of R&D tax credits and identify the current schemes. Learn about R&D eligibility, the documents you’ll need and the qualifying expenditure that will help you make a successful tax relief claim.

For over 20 years, R&D tax credits have helped to form a culture of innovation across the UK. With HMRC generously incentivising scientific and technological advancement, thousands of businesses have been able to offset the financial burden of research and development, allowing them to gain a competitive edge throughout global markets. But how does the R&D tax relief work?

We explore the tax credit system in this practical guide, helping you to understand the ins and outs of R&D tax relief. But first, let’s explore the history of the incentive.

What are R&D Tax Credits?

Back in the year 2000, the British government was seeking a way to incentivise businesses to invest in innovative advancement. With the idea that such advancements would support the economy while creating an innovative hub in the UK, they developed a tax relief system that would encourage small and medium sized enterprises (SMEs) to undergo research and development projects.

This tax relief system is what we now know as R&D tax credits.

Throughout the years R&D tax relief has expanded to provide large businesses with financial relief, while it continues to support SMEs. Today, it has helped thousands of ideas become a reality, and has provided businesses with advantageous opportunities.

The R&D Tax Credit Schemes

In order to encompass the wide variety of businesses that may be eligible for R&D tax credit relief, HMRC formed two schemes.

While SMEs are offered substantial financial relief from the SME scheme, large companies operate under RDEC (Research and Development Expenditure Credit).

As of April 1st 2024, these two schemes are blending to form the merged scheme. This means that large companies and SMEs will receive the same percentages of R&D tax credit relief for their eligible research and development efforts, if their accounting period begins on or after April 1st 2024.

Claiming R&D Tax Credits

Thanks to the generosity of HMRC, the reach of R&D tax credit relief is so extensive that it is available to most industries. In fact, when discussing eligibility, HMRC state the all businesses may be able to claim unless the advancement is in:

The arts

Humanities

The social sciences (including economics)

As the relief is so extensive that it allows the majority of businesses to benefit from their innovations, understanding the specific eligibility requirements is crucial to making a successful R&D claim.

R&D Tax Credit Eligibility

In order to qualify for the R&D tax relief, your business must have undergone a research and development project that aimed to overcome a scientific or technological uncertainty that could not otherwise be solved by an expert in the field.

This serves as the crux of R&D eligibility, as it ensures that work has been done to make an advancement in the industry. Ultimately the research and development should result in the creation of one of the following:

A new product

An improved product

A new software

A new process

To help you identify the eligibility of your research and development project, we’ve compiled a checklist for R&D tax credit eligibility:

Click here to check your eligibility and get started with your R&D tax credit claim.

Maximising Your R&D Claim

After eligibility has been determined, there comes the task of compiling an accurate account of your research and development project — something that takes a lot of organisation.

In order to streamline the claims process and maximise your claim, we recommend that you follow these steps:

Determine your eligibility

Gather necessary documents

Identify eligible costs

Calculate eligible costs

Understand the latest R&D tax credit rates

Complete relevant forms and reports

Review and verify the details of your application

Submit the application to HMRC

While these steps help you to form an eligible claim, HMRC recommends that businesses collaborate with R&D tax credit specialists in order to ensure that their claims are compliant with the latest policies.

Documents Required for R&D Tax Relief

A successful R&D tax credit claim consists of accurate and detailed documentation that paints a clear picture of the research and development. While the required documentation typically depends on the nature of the project, there is an outline of documentation that every business should include in their R&D claim. This includes:

Project descriptions

Technical narratives

Financial records

Tax computations

A full list of required documentation.

About the Claim Notification Form

Some businesses are required to notify HMRC of their intent to claim R&D tax credits in what’s known as the claim notification form. Typically this form is a requirement for businesses that have not yet claimed the tax relief, but there exists a rule that may allow some businesses to forgo the claim notification altogether.

Here’s what HMRC say about the 3 year exemption rule:

“Claim notification will only be required where a customer has not made an R&D claim during the period of three years ending with the day before the first day of the accounting period.”

Source: HMRC

This means that those claiming under the SME scheme do not need to submit a claim notification form, so long as they have claimed R&D tax credits within the previous three years according to their accounting period dates. For this reason, it’s vital that businesses evaluate whether they qualify for this exemption by:

Verifying whether or not the claim qualifies under the SME scheme

Confirm that the exemption integrates with the existing R&D claim

If you do not meet the criteria for the 3 year exemption, you must submit your claim notification form within 6 months of the conclusion of the relevant accounting period. Failure to do so could result in an invalid claim.

Click here to learn more about the claim notification form and the 3 year exemption rule.

R&D Qualifying Expenditure

Considering your R&D tax credit claim is a return on investment into innovative advancement, understanding the qualifying expenditure is vital.

While these costs may vary depending on the industry of the business and the nature of the research and development, there are some expenses that are universally recognised as qualifying costs. They are:

Direct research and development staff costs

Externally provided research and development staff costs

Consumable items

Software used directly in research and development

Businesses outsourcing research and development activities, developing pharmaceuticals, or working on prototypes may be able to claim additional relief.

Calculate the overall worth of your upcoming claim with our R&D tax credit calculator.

Learn more about qualifying expenditure.

The Benefits of Claiming R&D Tax Credits

A successful claim has the ability to elevate your business by providing a financial boost and a competitive advantage over others. Here’s what else a claim could do for your business:

Tax credits or deductions You pay less tax meaning you have a pot of funds to use and reinvest into your project — whether that’s to make more hires, drive your marketing strategy or invest in new equipment

Offset costs Successful R&D claims may allow businesses to recover a portion of their invested expenses, offsetting the financial burden of research and development

Attract investment opportunities A successful research and development project is highly regarded by prospective investors, as it’s proof that you’re dedicated to advancement

Obtain a competitive advantage With the ability to expand the release of your innovations that are a direct result of your research and development, you place your business ahead of competitors as you present something new to customers or clients

Truthfully, R&D tax credits open the window of opportunity to further invest in the future of your business, allowing you to obtain sustainable growth. Here’s how capitalising your research and development aids in this:

Example of a Successful R&D Tax Credit Claim

In order to highlight just how beneficial R&D tax credits can be, we want to take a close look at one of our clients.

This particular client oversaw a major research and development project that sought to produce an industrial process that would convert waste into high quality biofuel. By developing both a new process and a new technology, they were able to easily qualify for R&D relief, given that the project overcame both scientific and technological uncertainties that required an expansive team.

Given the fact that their project went way beyond the usual scope of research and development that is often seen by HMRC, our team of specialists spent a lot of time collaborating with this client, ultimately helping them to secure a return of £82,570.25.

Read the full case study.

How Alexander Clifford Provide Additional Support During R&D Claims

As leading R&D tax credit specialists, our team streamlines the claims process, ensuring that eligible businesses receive the maximum benefit available to them. By dedicating their expertise to compiling compliant claims, our team of specialists have submitted over 2,400 successful R&D tax credit claims on the behalf of our clients.

Making Alexander Clifford your trusted choice for R&D tax credits.

Is your business ready to make its claim? book an appointment with one of our specialists.

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R&D Tax Relief for Unsuccessful Projects

A failed research and development project is no longer the end of the road. Minimise financial risk with R&D tax credits, understand what happens if your project is cancelled, delve into the eligibility criteria for R&D tax relief, and review the additional documents you need to make a successful R&D claim for an unsuccessful project.

Did you know that your research and development project may be eligible for R&D tax credits even if it’s unsuccessful? That’s right, as long as the project meets the eligibility criteria set forth by HMRC, you can receive financial relief for your invested time and resources spent on qualifying activities.

So how does it work? We asked our team of specialists the most important questions surrounding R&D tax relief for failed projects, so that your business can form a successful claim that aligns with the latest policy and legislation.

Are Failed Research and Development Projects Eligible for R&D Tax Credits?

As the existence of R&D tax relief is aimed at encouraging innovation, the British government wanted to ensure that all eligible projects — whether they are successful or not — are able to successfully claim the relief. So yes, failed projects are eligible for R&D tax credits.

Book a quick meeting: https://calendly.com/alexanderclifford-marketing/30min

Although you can claim for failed research and development projects, there are a number of additional circumstances that may affect your R&D claim.

Claiming R&D Tax Credits for Cancelled Projects

Here in the UK, businesses can claim R&D tax credits for failed projects, but they must be able to prove the aim of the overall project. In addition to this, businesses must be able to present accurate documentation that details the work done, the monetary investment, and the reasons for the project being abandoned.

Some of the key aspects to making a successful R&D tax credit claim for a cancelled research and development project, are that businesses must have done the following:

Undergone qualifying activities

Invested in qualifying costs

Handling R&D Tax Credit Claims for Multiple Failed Projects

Provided each project meets eligibility requirements, businesses may claim R&D tax credits for multiple failed projects at once. The following image highlights some of the guidelines involved in claiming for multiple projects simultaneously.

By following these guidelines, businesses are able to effectively maximise R&D tax credit relief by building compliant claims.

The Difference Between SME Scheme and RDEC for Failed Projects

Businesses claiming R&D tax relief in the UK (prior to April 1st 2024) operate under different schemes dependent on their size, meaning there are some differences when it comes to those claiming for failed projects.

Under the SME scheme, businesses are able to claim up to 33% of their total qualifying expenditure, even for failed projects. Large businesses operating under RDEC have a lower relief rate of 13%.

Those claiming for a project that took place in an accounting period that began either on or after April 1st 2024, will fall under the new merged scheme. Under this scheme, both large businesses and SMEs will still be able to make claims for failed research and development projects, but there will be some slight changes in regards to the rates.

Example of R&D Tax Credit Rates for Failed Projects

What Type of Projects Qualify for R&D Tax Credits?

HMRC has a specific definition of research and development when it comes to R&D tax credits. Essentially they state that a qualifying research and development project must aim to overcome an industry uncertainty that cannot be otherwise solved by an expert in the field.

Additionally, qualifying projects must aim to make a scientific or technological advancement that results in one of the following:

A new product

An improved product

A new software

A new system

Although your project may have failed to produce a final result, the project aim, the qualifying expenditure, and other documentation that helps to produce a successful claim.

What Costs Can Be Claimed for R&D Tax Credits?

The R&D tax credit relief is incredibly generous to claimants, allowing them to claim an array of costs. Some of these include:

Staff costs (including PAYE, NIC and pension contributions)

Consumable items (including materials and some utilities)

Test stage prototypes

Software used directly in research and development

For a full list of qualifying expenditure.

How to Document Failed Research and Development Projects

Successful R&D tax credit claims rely on accurate and specific documentation that details the journey of a research and development project. Some of the required documents include:

Project descriptions

Technical reports

Financial records

For a full guide to R&D documentation, click here.

For projects that didn’t meet the intended result, it’s essential to include the following additional documents:

Detailed report of the aims and objectives of the project

Record of each activity undertaken throughout the project

Additional report of reasons for project failure or abandonment

This additional documentation helps to paint a clearer picture of the project, allowing the R&D tax credit claim to stand up to any potential scrutiny from HMRC.

Final Thoughts

Considering the fact that HMRC supports not only innovation but intent to innovate through the R&D tax credit relief, potential failure is no longer a factor when it comes to planning a research and development project.

In fact, with the relief being available for eligible failed projects, businesses are able to approach innovative advancement with fewer risks.

In recent years, one of HMRC’s recommendations for businesses looking to make an R&D claim is that they consult with an R&D tax credit specialist. By collaborating with the right specialist, businesses can receive professional guidance throughout the course of their claims.

How to Compile a Successful R&D Claim With Alexander Clifford

As leading R&D tax credit specialists, the team at Alexander Clifford are dedicated to simplifying the claims process, and giving business leaders their time back. By collaborating with clients to form project timelines and build accurate technical reports, our team has compiled and submitted over 2,400 claims with a 100% success rate.

That’s why Alexander Clifford is your trusted choice for R&D tax credits.

Discover how our specialists can use their expertise to assemble your claim. Submit your details below, or book an appointment.

Source: https://alexanderclifford.co.uk/blog/rd-tax-relief-for-unsuccessful-projects/

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Subcontracted R&D Tax Relief Guide for SMEs & Large Companies

Outsourced research and development can boost your R&D tax credit claim, but how does it work? We cover all this and more in our guide to subcontracted R&D. Learn whether your SME or large company can claim, how the merged scheme may affect subcontracted R&D claims, the eligibility criteria for R&D activities, and even get visual aid on the latest HMRC policies.

For many businesses, there may come a time in their research and development project when there is a necessity to outsource specific activities. These expenses can present for some, as a financial burden — that is unless they have a plan to claim R&D tax credits.

As an initiative formed by the British government, the R&D tax credit relief has a wide range of criteria that businesses must adhere to. In our mission to simplify the R&D claims process, we’ve compiled all of the relevant information on outsourced R&D to help you prepare for your future successful claim.

What is Subcontracted R&D?

When an individual, business or organisation is outsourced to complete research and development activities, it’s known as subcontracted R&D.

While the subcontractor carries out specific tasks, the contracting company retains control over the research and development project. These tasks may include:

Developing new products

Carrying out research

Constructing new processes

Forming new technologies

For some businesses, the costs incurred as a result of outsourcing research and development activities may open the doors to additional financial resources in the form of R&D tax credit relief. Similarly, those contracted to carry out research and development activities may benefit from the relief, contingent on the contracting party.

Subcontracted R&D Under the SME Scheme

When it comes to subcontracted R&D as an SME (small and medium sized enterprise), claiming R&D tax credits can come with contingencies.

Provided they are the contracting party, SMEs can benefit from R&D tax credits under the SME scheme when they outsource research and development activities to:

Other SMEs

Large companies

Qualifying bodies

As a subcontractor however, SMEs cannot claim the tax relief under the SME scheme. Instead they must claim incurred costs under the RDEC scheme — but even that provides limitations.

The following is a visual example of subcontracted R&D for SMEs:

Subcontracted R&D Under RDEC

SMEs looking to claim R&D tax credits as a subcontractor under RDEC, can only do so if they have incurred qualifying research and development costs for activities performed for large companies.

For large companies, subcontracted R&D under RDEC is more straightforward, due to the fact that large companies can only claim as a subcontractor if they are outsourced by another large company or by a group company.

As a contracting company, large companies can claim the costs incurred by outsourcing research and development activities to an individual, a group of individuals, or a qualifying body such as:

A charity

A higher education institution

A scientific research organisation

A health service body

The following is a visual example of subcontracted R&D for large companies:

How the Merged Scheme Impacts Subcontracted R&D

Subcontracted R&D under the merged scheme changes the eligibility criteria for both SMEs and large companies. These criteria specify that subcontracting costs will only be eligible for R&D tax credit relief if:

If they undergo independent R&D outside the parameters of their contract

If the contractor didn’t believe R&D to be necessary but the subcontractor does

If the contracting company isn’t based in the UK

If the contractor is a non taxable entity (such as a charity)

In order to determine eligibility for R&D tax credits as a subcontractor under the merged scheme, it’s important to follow these steps:

Identify qualifying activities

Determine qualifying expenditure

Gather necessary documents

Calculate the total expenditure of your claim (use our R&D tax credit calculator)

FAQs

We want to ensure that you have all the relevant information about subcontracted R&D so that you may plan ahead for future research and development projects. So we’ve taken the time to ask our specialists some of your most frequently asked questions, in order to get you all the information you need to maximise your future claims.

What’s the Rate of Subcontracted R&D?

Under both the SME scheme and RDEC, the current rate for subcontracted R&D is 65%, meaning businesses may claim that percentage of costs incurred by outsourced research and development.

The merged scheme upholds the rates of RDEC and the SME scheme, meaning that those claiming subcontracted costs prior to April 1st 2024 will be able to receive up to 65% of the incurred costs.

How Does Ownership of Intellectual Property Impact Subcontracted R&D Tax Credits?

Ownership of intellectual property (IP) is important when it comes to subcontracted R&D, as to be eligible for R&D tax relief under the merged scheme, claimants must either possess the IP or the rights to exploit it. Without ownership or rights, subcontracted R&D costs may not qualify.

How Can I Optimise My Subcontracted R&D Strategy for R&D Tax Credits?

In order to form an optimised R&D strategy that allows you to maximise your R&D claim, we recommend that you follow these steps:

Secure ownership or exploitation rights through legally binding contracts

Carefully select experienced partners

Maintain meticulous documentation

Balance outsourced research and development with outsourced

Stay updated with the latest HMRC legislation

Collaborate with R&D tax credit specialist

How Alexander Clifford Can Help

Our leading team of R&D specialists dedicate themselves to understanding the ins and outs of the R&D tax credits system. Using their expertise, they’ve collaborated with clients in order to compile and submit over 2,400 claims, and they’ve done it with a 100% success rate.

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How R&D Tax Credits Support Innovation in Retail

Businesses in retail rely on advancement in order to remain competitive, but there could be added benefits for those investing in research and development. Discover the ins and outs of technological innovation in retail, the importance of advancing research and development, future innovative trends, how UK based retailers can benefit from R&D tax relief, and the qualifying criteria.

In the 21st century, retailers rely on technology to be able to provide a 24 hour service to consumers. In order to adapt technology to their needs, many retailers invest in costly research and development projects — costs that could be significantly reduced with R&D tax credits.

To highlight the power of technology in the retail industry, we’re taking a look at recent innovations, future trends and the tax relief that can help transform the way retail businesses approach research and development. What’s more is that we’ll touch on how to prepare for an upcoming R&D claim, with the relevant documentation.

Technological Innovation in Retail

While advancements in technological innovation have revolutionised a wide range of industries, the retail sector has been quick to adapt. This has greatly transformed the way retailers operate and engage with consumers, with the integration of:

Artificial intelligence (AI)

Data analytics technology

Personalised marketing strategies

Using these advancements, retailers now have the ability to analyse consumer preferences in real time, tailor promotions, and optimise inventory management efficiently.

Moreover, advancements in payment technologies (such as mobile wallets and contactless payments) have streamlined transactions, making the checkout process quicker and more convenient for consumers.

The Role of Research and Development in Retail

Considering the fact that innovation in retail supports businesses through everyday management and customer satisfaction, while presenting opportunities to thrive in a competitive market, adopting fresh advancement is quickly becoming a necessity for retailers. But great innovative advancements don’t just appear out of thin air.

Necessary advancements are often the product of intense research and development efforts, with retailers often choosing to invest in their own innovations based on their current needs. By investing in their own research and development efforts, retailers are able to anticipate and adapt to:

Changing consumer preferences

Technological advancements

Market trends

While the benefits of investing in research and development are alluring, some retailers may be put off by the financial pressure that innovation often puts upon a business. Thankfully for those in the UK, there exists government backed financial relief that’s known as R&D tax credits.

How do Omnichannel Strategies or AI Enhance Retail?

Omnichannel strategies and AI work cohesively to play an essential role in reshaping customer experience and optimising operational efficiency. Their combined efforts allow customers to do the following through various platforms:

Browse

Purchase

Return items

While omnichannel strategies operate to provide a cohesive shopping experience through integrating physical, mobile and online stores, AI may take a more customer specific approach by providing customers with round the clock service via automated chatbots, and by presenting personalised recommendations.

AI also provides retailers with additional capabilities that can help them to form advanced marketing strategies via the use of automated data analysis that presents real time insights.

Overall, implementing omnichannel strategies and AI not only enhances the shopping journey but also boosts operational efficiency by reducing manual tasks and optimising resource allocation.

Future Trends in Retail Innovation

The future of retail innovation holds promising prospects as technological advancements continue to reshape the industry landscape. Becoming more consumer centric, emerging trends include:

Augmented reality (AR)

Virtual reality (VR)

These technologies allow customers to visualise products in real world settings before making a purchase, bridging the gap between online and in store shopping.

As consumers become more eco-conscious, another emerging trend prioritises sustainability throughout the supply chain. This allows businesses to put their ethics into practice, helping them align with customers.

Finally, one of the surprising trends of the future is set to be the rise of voice commerce through smart assistants (such as Amazon Alexa, Apple’s Siri and Google Assistant). Voice activated shopping is set to offer customers a convenient and efficient way to make purchases, driving retailers to adapt their strategies to cater to this growing trend.

How Do R&D Tax Credits Support Innovation in Retail?

As a government funded incentive, R&D tax credits have the ability to support innovative businesses by offsetting some of the cost invested in research and development. The following table highlights exactly how this could benefit retailers throughout their own technological advancement:

Qualifying for R&D Tax Credits as a Retailer

As R&D tax credits are a government incentive, qualifying for the relief requires following strict HMRC guidelines. First of all, those looking to claim must ensure that their research and development project aligns with HMRC’s definition — that is to say that a research and development project is a project that aims to overcome a technological or scientific uncertainty, that could not be easily solved by an expert in the field.

Following this, claimants must ensure that the project aim is within the realm of their industry. For example, if a retailer is looking to invest in fintech innovation, it must be relevant to their business in order to qualify for R&D tax relief.

In order to present the aims of a research and development project, HMRC guidelines require that claiming businesses organise documentation which includes:

Project descriptions

Technical reports

Qualifying activities

Qualifying costs

With accurate and in depth documentation that supports qualifying factors, claims are held to a high standard that may stand up against scrutiny. This not only allows businesses to ensure the safety of received tax credits, but it also allows them to maximise their tax credit relief.

Example of Retail Businesses Successfully Claiming R&D Tax Credits

In order to show exactly how R&D tax credits can have an impact on retailers, we wanted to place a specific focus on one of our successful clients.

This client combined technology with psychological research in order to build an AI system that could more accurately analyse customer data and recommend products. This provided the customer with bespoke recommendations which ultimately improved their level of loyalty.

The amount of research and development that went into building an understanding of customer psychology and in developing the technology through machine learning, the specialist team at Alexander Clifford immediately recognised that this client qualified for R&D tax relief.

Through the efforts of our team and our collaborative process, this client received £166,695 in R&D tax credits.

FAQ’s

The R&D tax credits system is rife with policy, meaning there is a lot of information to take in. To help simplify the claims process, we wanted to touch base on some of your most frequently asked questions surrounding R&D tax relief and innovation in retail.

What Costs Qualify for R&D Tax Relief?

R&D tax credits can be incredibly generous for innovative businesses, because they offer a portion of financial relief for a range of costs, such as:

Staff costs (such as PAYE, pension, NIC contributions)

Consumable items (such as materials)

Software used in research and development

For a full list of qualifying expenditure, click here.

Do I Need Specific Documents for R&D Tax Credits?

In order to compile an effective and robust R&D claim, businesses will need to provide a range of specific documentation that may include:

Project information

Tax computations

Financial records

Additional information

Click here for a full list of required documentation.

What Common Mistakes Should Retailers Avoid When Claiming R&D Tax Credits?

When looking to make an R&D tax credit claim, there are many mistakes that are commonly made — especially for those who are new to the claims process. Some of the most frequent mistakes in relation to R&D relief for retailers we see are:

Overlooking small projects Many retailers make the mistake of believing that only large projects can qualify for the tax relief, but this is far from the truth as small projects may involve technological challenges that qualify

Neglecting software development Retail in the 21st century relies on a range of software, and as businesses look to develop them in a way that simplifies processes, it’s easy to overlook them as research and development projects — but if the research and development requires overcoming technological challenges, it may qualify for relief

For more information about common mistakes made in R&D tax credits and how to avoid them, click here.

Final Thoughts

R&D tax credits are more than just a financial relief mechanism; they are a strategic enabler for growth and innovation in the retail sector. Retailers who leverage these credits can experiment, innovate, and optimise operations, all while mitigating the financial risks associated with development activities.

By continuously investing in research and development, retailers can stay ahead of technological trends, meet evolving customer demands, and drive long term success. However, ensuring eligibility and maintaining comprehensive documentation is critical to maximising the benefits and successfully navigating the claims process.

How Alexander Clifford Can Help Maximise R&D Tax Credit Benefits

When filing your R&D tax credit claim, HMRC recommends that you work with an R&D tax credit specialist. Not only will this help ensure that your claim is compliant with HMRC standards, but it will also help to maximise your relief as a specialist may be able to identify additional qualifying expenditure.

Here at Alexander Clifford, our specialist team collaborates with clients to assemble effective, compliant claims that produce positive results. With over 2,400 successful claims submitted to HMRC, our team has formed a 5-star service that simplifies the claims process, and provides clients with the maximum benefits from their research and development efforts.

This is what makes Alexander Clifford your trusted choice for R&D tax credits.

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Recognise Technical Uncertainties and Maximise R&D Relief

It’s one of the most important parts of an R&D claim — decipher the ins and outs of technical uncertainties. Recognise how to identify technical uncertainties, what makes them necessary, how it impacts your eligibility and how to maximise your R&D tax credit claim.

In the world of R&D tax credits, being able to identify and present your technical uncertainty is essential. As the very basis of the relief, these uncertainties act as the initial qualifying criteria that will ultimately determine the success of a claim. But how can understanding it help you to maximise a claim?

Well we answer this important question and more, with this deep dive into technical uncertainties — what they are, how to navigate them, and how they act as the primary guideline for all R&D claims.

What is a Technical Uncertainty?

The concept of technical uncertainties may be vast, but in its definition they can be stringent. You see, a technical uncertainty arises when there is no clear path or solution to achieve a specific outcome in a project.

This represents a gap in knowledge or capability that must be addressed through innovative thinking and experimentation.

How to Identify Technical Uncertainties

In relation to R&D tax relief, HMRC has an even clearer definition in regards to technical uncertainties, wherein there is no clear path or solution that can be overcome by an expert individual in the field.

Essentially this means that in relation to R&D tax credits, a team is required to push the boundaries of existing knowledge in order to achieve the specified outcome — making identifying the technical uncertainties a necessity in order to identify where further investigation and research are required. By recognising and addressing these uncertainties, businesses can push the boundaries of knowledge and create groundbreaking solutions.

The following showcases how you may identify whether or not your research and development project meets the definition of a technical uncertainty, and therefore qualifies for R&D tax credits:

Verify that the project is focused on scientific or technological advancement

Evaluate existing solutions and knowledge

Determine whether a competent professional could individually provide a solution

Verify that research and development is necessary to overcoming establishing a solution

Confirm that the solution is technical based and not commercial

While these steps will help you to identify your technical uncertainties, speaking to a professional R&D tax credit specialist will help you to quickly confirm whether or not your project falls within the parameters of HMRC’s definition.

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Navigating Technical Uncertainties With Research and Development

By undergoing a research and development project with the aim of resolving a technical uncertainty, businesses are able to:

Explore new solutions

Experiment with designs

Produce test-stage prototypes

Build effective processes

This trial and error approach to advancement is what pushes the boundaries of science and technology, while allowing businesses to prove themselves ahead of the curve. It’s this kind of innovation that the R&D tax credits system supports.

3 Examples of Overcoming Technical Uncertainties

HMRC Guidelines for R&D Tax Credits

As HMRC requires that research and development projects aim to overcome technical uncertainties in science or technology, it stands to reason that businesses across a wide range of industries may be eligible for the tax relief.

Given the extent of the relief, it stands to reason that there are a range of stringent HMRC guidelines in place for claimants, to ensure authenticity throughout claims. In order to adhere to these guidelines, it’s recommended that claiming businesses do the following:

Identify qualifying activities These activities may include systematic investigations, trial and error, experimentation, and the development of new or improved processes, products, or services

Determine the R&D scheme(s) you qualify for Depending on the size of your business and what date your accounting year begins, your claim could fall under the SME scheme, RDEC or the merged scheme

Calculate qualifying costs This includes staff costs, materials, consumables, software, subcontracted R&D and a range of other costs incurred, the full list can be found here

By working your way through these three steps, you’ll be able to begin building a solid claim that adheres to eligibility criteria. For a full checklist on R&D tax credit eligibility, download our eBook.

Maximising R&D Claims With Accurate Documentation

The ultimate goal when submitting an R&D tax credit claim is to receive the maximum relief that the guidelines and policy allows. In order to do this, our specialists recommend that you keep updated and accurate documentation throughout the course of a research and development project.

By doing this, businesses are able to easily identify qualifying criteria, build an authentic project narrative, and locate the various challenges encountered throughout the project.

Final Thoughts

In conclusion, the identification of the technical uncertainties that sparked your research and development project is one of the most important aspects of an R&D claim.

Not only does it provide fuel for innovation, but the technical uncertainty acts as the very crux of your claim, helping to establish eligibility at the base of your claim.

While the steps involved in identifying technical uncertainties can feel a little complicated, you may simplify the process by consulting with an R&D tax credit specialist.

How Alexander Clifford Propels R&D Tax Credit Claims

The specialist team at Alexander Clifford are dedicated to simplifying the R&D claims process, and showcase this by their ability to identify your eligibility in the course of a phone call.

As leading R&D tax credit specialists, our team has helped to compile and submit over 2,400 claims on the behalf of clients. Their dedication to maximising claims is why our R&D services are rated 5-star.

And it’s also what makes Alexander Clifford your trusted choice for R&D tax credits.

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Understanding R&D Tax Credits: How Far Back Can I Claim?

Don’t run out the clock on your R&D claim, instead, understand how you can form a compliant claim that awards you significant financial benefits.

When it comes to R&D tax credits, timing is crucial. Not only do HMRC set time limits for first time claimants, but each claim must adhere to specific deadlines in accordance with their own accounting period.

When seeking out information on these deadlines, the language can sometimes seem a little complicated however. So instead of spending hours trying to make sense of the government guidelines, we’ve simplified the material to present you with a direct insight into the time limits and deadlines that you need to know.

Understanding R&D Tax Credits

After its introduction in the year 2000, the R&D tax credit incentive has empowered businesses throughout the UK to invest in innovation. Initially the incentive was available only to small and medium sized enterprises (SMEs), but as of 2002 has been opened up to large companies, forming two primary schemes:

SME scheme Available for businesses with fewer than 500 employees and either an annual turnover under €100 million, or a balance sheet under €86 million

RDEC Available to large companies with 500+ employees and SMEs with subcontracted R&D that doesn’t meet specific qualifying criteria under the SME scheme

In order to qualify for R&D tax credits, businesses must ensure that their projects fit HMRC’s definition of research and development. That is to say that qualifying research and development projects are those that aim to achieve an advancement in science or technology by resolving uncertainties that could not be overcome by an expert in the field.

In order to understand more about R&D tax credits and whether your research and development project meets the eligibility criteria, book your call with one of specialist consultants.

Book a quick call back : https://calendly.com/alexanderclifford-marketing/30min

Time Limits for Claiming R&D Tax Credits

Understanding the time limits and deadlines of R&D tax credits is one of the most important aspects of the claims process, and at present there are two that you need to keep in mind when preparing to make a claim.

Firstly, you need to understand the claim notification deadline. As of April 1st 2023, businesses looking to make a claim must notify HMRC of their intention to claim R&D tax credits if:

They have not claimed R&D tax relief in the previous three years.

They are claiming for the first time

Businesses making a claim notification must do this within six months of the end of their accounting period.

Secondly, you have to understand the time limits involved in claiming the tax relief. Aligning with the deadline for a corporate tax return (CT600), the time limit for claiming R&D tax credits is two years from the end of the accounting period during which the research and development project occurred.

Example of the R&D Tax Credits Time Limit

3 Ways to Prepare Your R&D Tax Credit Claim

When looking to make an R&D tax credit claim, there are a few things that you should prepare beforehand in order to maximise the potential financial benefit of your claim. We’ve broken down what you should prepare into these 3 simple steps.

Step One: Identify Your Qualifying Factors

Before making your claim, you must first establish your qualifying activities. These are the actions that you took throughout your project in order to overcome the identified uncertainties, and that adhere to the following criteria:

Activity should aim to advance knowledge or capability

Activity must seek to resolve industry related uncertainties

Activity should be conducted using a systematic approach

Activity should not be easily replicated

Prior to identifying your qualifying activities, you’re required to identify the qualifying expenditure associated with each activity. These costs include:

Direct staff costs (such as PAYE, NIC and pension contributions)

Consumable item costs

Software used directly in R&D

Test stage prototype costs

By identifying the qualifying factors in this order, you may be able to maximise the extent of the financial benefits received from R&D tax credits.

Step Two: Gathering Documentation

Your documentation is what certifies your R&D claim. The documents that you gather should be able to present a timeline of your project, and certify your qualifying expenditure, some of which include:

Project reports

Employee time sheets

R&D related financial reports

Step Three: Organising Your R&D Claim for Each Accounting Period

Many research and development projects span across a variety of years, necessitating more than one claim. For this reason, it is imperative that you organise your project documentation for each accounting period.

By organising your claim for each accounting period, not only will you be able to make the claims process more efficient, but you’ll also be able to prepare for any potential HMRC enquiries.

How Alexander Clifford Can Further Maximise Your Claim

Known for their efficiency and expert insights into HMRC policy, our specialist team is dedicated to ensuring that your claim is compliant and rewarding.

As leading R&D tax credit specialists, the team at Alexander Clifford have compiled and submitted over 2,400 claims on behalf of our clients, resulting in an average financial benefit of over £50,000.

That’s what makes Alexander Clifford your trusted choice for R&D tax credits. https://alexanderclifford.co.uk/