Myths That Keep Businesses from Claiming the R&D Tax Credit

Oct 04, 16 Myths That Keep Businesses from Claiming the R&D Tax Credit

The HMRC says that only 3% of the actual projects claim the R&D tax credit from the government. This means that approximately only one million pounds is being claimed under this relief scheme –it was actually supposed to be more than twenty-five million pounds.

The main reason for not able to claim is the myths that are surrounding the R&D tax credits facility. So, here are some of the myths that surround the same and the facts that will help your company make the R&D tax credit from the government.


Before reading the myths, first let us see what R&D Tax Credits is all about. It is a scheme that is started by the government to help companies that are working in the R&D sector. Since it is very important to have R&D activities that help the overall economic development of the country, the government introduced this scheme.

Here are the Myths:

1.  I am not eligible to claim the R&D taxes: According to the HMRC, any company that is a regular tax payer is eligible to apply for the R&D tax credit from the government. If you are a regular tax payer for the last couple of years, you stand a chance to avail this facility.

2.  I do not work in technological sectors: There is a myth that you can claim the R&D tax credit only if you are working in the technological sector. But the HMRC claims that most of the projects cannot be classified as purely technological in nature. If you project is working on process or services which helps the general public and is beneficial to the larger section of society, you can avail this facility. The projects that come under this section include software development, designing of new products and engineering new products with various new ingredients. Even if your research is working in improving the manufacturing process you can still go ahead and claim the tax benefit from the government. Enhancing existing technology in any way is considered as advancement and hence claimable under the scheme. However, if you have taken assistance from the funding agency for your research activities, then the amount of claim that you can avail depends on the amount of financial aid that you have already received for this activity.

3.  I am a SME: Many small companies differ from taking the advantage of Research and Development Tax Relief thinking that it is not applicable to SME (Small and Medium Enterprises). It is a general myth that benefit is applicable only for large companies which is not so as R&D tax loans are applicable to SME, start-ups and large companies. Starting from April 2015, this scheme’s claim enhancement (the enhanced deduction) has been increased to 230% of the qualifying R&D expenditure incurred. This is specifically designed for SMEs alone.

4.  My research is making losses: Another most common myth about claiming R&D tax credit is a loss making SME cannot claim for the relief. The fact is that not only profitable companies, but also companies who are making a loss can claim the monetary assistance. The companies that are making profit can also claim the same in the form of reduction of CT (Corporate Taxes).