Reply to: R&D Tax Credits and Relief

[WordIsBond]

It can be a bit of a grey area and despite some of the comments on this thread, its not a dark-art or going to cause issues in the future if its done correctly.

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Interesting fact, you can claim even if a project you were working on didn't work out, as striving for the advance increases your knowledge, experience and capability so you can still recover costs incurred whilst the project is trying to resolve any of the technical challenges you are faced with.

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...what is important is to only claim for the genuine entitlement because if the amount is artificially inflated, then you can see how this could cause you problems later down the line.

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It is important to talk to specialists whether that's us or another company...

false.

Instead, apply for Advanced Assurance. HMRC has a special unit designed for this, and if you've got something legit, they will give you a LOT of help on what is claimable and what isn't, how to go about it, and they'll work with you through the process. Very helpful people -- and you don't have to pay for the advice, either.

If you've claimed for R&D before, you can't apply for Advanced Assurance, but if you haven't, that is definitely the way to go. I thought I was just getting approval, but I ended up getting a lot of advice and encouragement that some things for which I thought I couldn't claim, I should go ahead and claim.

[Hamilton Wood and Co]

I wonder did anybody tried to claim R&D Tax Credits and Relief?
As an example can you purchase of high-end PCs and equipment for machine learning (with multiple GPU) and prototype software development? And claim that for R&D?
Is it worth it?

Hi Andrew,

What is key with R&D is to be trying to advance your business and industry by seeking innovation.

If something has been done the same way before and you are not really securing a major advance by copying existing methods then the answer will be no, you can't claim...

However, lets say another company has done something weird and wonderful with machine learning and artificial intelligence (which is a hot topic for the UK government at the minute and there are grants available in this area), but the way they secured the advance was not known to you or your business and you go through a process of trying to secure the same or similar advance, by resolving your own uncertainties with the best way forward, then you may be able to claim a portion of the kits cost for the period the research and development (R&D) was taking place.

It can be a bit of a grey area and despite some of the comments on this thread, its not a dark-art or going to cause issues in the future if its done correctly.

It is important to talk to specialists whether that's us or another company but what is important is to only claim for the genuine entitlement because if the amount is artificially inflated, then you can see how this could cause you problems later down the line.

What is worth bearing in mind is that the incentive is in place to help support emerging and established businesses who are trying to move their industry and sector forward. Interesting fact, you can claim even if a project you were working on didn't work out, as striving for the advance increases your knowledge, experience and capability so you can still recover costs incurred whilst the project is trying to resolve any of the technical challenges you are faced with.

Hope this removes some of the misinformation that's out there.

Good luck!

Kelly Hamilton
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[northernladyuk]

So far impression is that it can be a minefield and more problems in future with HMRC. Definitely not worth for 10k

You probably want a UK tech startup forum for this type of question.

[AtW]

So far impression is that it can be a minefield and more problems in future with HMRC. Definitely not worth for 10k

Yup!

[AndrewK]

So far impression is that it can be a minefield and more problems in future with HMRC. Definitely not worth for 10k

[SeanT]

Good for you. But I didn't ask for your as usual useless opinion. I tried to find person with actual knowledge.

[Lance]

No projects are not for the client.

Let's say hypothetical - PCS with one of directors PhD and active research project, with actual research papers to back it.
Machine learning PCs are not gamer PCs, they can have >6 "graphic cards". And you can even look at multiple PCs with distributed calculation. Not going into technical details, but that cost would be 10-20k for basic cluster.
Maybe it would be beneficial to increase basic salary and claim that for R&D or you can't do that for director?

If the project is not for a client then you’re arguably not a PSC.
You need to understand what a qualifying expenditure is. The project types that qualify are quite wide so as long as you tick the right boxes you’ll likely be Ok.

Read this https://www.gov.uk/guidance/corporat...ment-rd-relief

[AtW]

You can be paid whatever the company wants to pay you.

Yes, but HMRC won't be thrilled to see 100% salary of the sole Director used for R&D tax relief

[TheFaQQer]

Maybe it would be beneficial to increase basic salary and claim that for R&D or you can't do that for director?

You can be paid whatever the company wants to pay you.

[AtW]

If you've got some grear idea that needs R&D to make you lots of money later then focus on that idea, not R&D tax relief which was intentionally designed not to be claimable by almost any small company

We claim a fraction of our overall R&D and get it audited by Deloitte to be sure it's within the rules, IMHO most small companies claiming it probably fo it wrongly - I expect big crackdown anytime now

[northernladuk]

No projects are not for the client.

Let's say hypothetical - PCS with one of directors PhD and active research project, with actual research papers to back it.
Machine learning PCs are not gamer PCs, they can have >6 "graphic cards". And you can even look at multiple PCs with distributed calculation. Not going into technical details, but that cost would be 10-20k for basic cluster.
Maybe it would be beneficial to increase basic salary and claim that for R&D or you can't do that for director?

I'd say get your accountant to run the numbers for you as the drip feed of hypothetical information can only lead to a useless opinion.
He might actually know what a PCS is.

[AndrewK]

10 years ago a client of mine was claiming it. It was a grey area really as it was a hosting company. The argument was ‘it’s a new way of hosting’. It wasn’t really but it was for the client.
They got away with as
1) they were a company with 20+ staff
2) HMRC were falling over themselves for people to use those credits as there was a shortfall.

I doubt a PSC would get away with it. For a start almost all PSCs work is for a client who owns the IP and therefore would be the party to claim those credits.

Nice try though. Why not just buy the gamer’s PC as Visio needs a decent graphics card. And it’s an asset that will last more than 3 years.

No projects are not for the client.

Let's say hypothetical - PCS with one of directors PhD and active research project, with actual research papers to back it.
Machine learning PCs are not gamer PCs, they can have >6 "graphic cards". And you can even look at multiple PCs with distributed calculation. Not going into technical details, but that cost would be 10-20k for basic cluster.
Maybe it would be beneficial to increase basic salary and claim that for R&D or you can't do that for director?

[AndrewK]

R&D tax relief is not another mechanism allowing companies to lower the tax obligations. It is there to encourage R&D and people like AtW benefit from it. If you are genuine you would be hiring PHD's and indulging in how R&D into how machine learning can be used to write self driving cars or something like that.

This is exactly what I do (just not for cars).

[AndrewK]

It's worth it if you are doing R&D, which I'm sure you are not.

Good for you. But I didn't ask for your as usual useless opinion. I tried to find person with actual knowledge.

[northernladyuk]

They might have claimed it, doesn't mean they did it correctly. We'd need a lot of detail to comment but general projects for a company and web design don't come close to the definition of R&D. A bunch of contractors & permies implementing a new solution for a client/company is not R&D. Last time we discussed this someone said their client was claiming it and after a discussion it wasn't correct.

There must be a contractor payment scheme model in here somewhere.