What is R&D tax?
Research and Development (R&D) tax credits are a UK government tax relief that rewards companies of all sizes and sectors who invest in innovation. R&D tax relief can form an essential part of business growth, given in the form of a direct cash payment from HMRC or corporate tax reduction.
- SMEs can claim up to 33p for every £1 spent on qualifying R&D expenditure, or up to 11p for every £1 spent for large companies
- R&D can take place in businesses of any size or sector and the scheme is open to all UK limited companies
- You could be eligible to claim by creating or improving products, processes, services, devices or knowledge
- This cash boost could be used to reward staff, grow your team or fuel your next project
Who can claim R&D tax credits?
The governing legislation is purposefully broad in order to capture innovation across all sectors, from construction to food, to energy to insurance – the scope is huge. Your projects needn’t have been ultimately successful or commercially realised, and you can also claim for work undertaken on behalf of a client as well as your own projects.
If you can answer 'yes' to the following, it's very likely you can benefit from R&D tax credits:
- You are a limited company subject to UK corporation tax
- Your projects have/had an uncertain outcome
- Your projects go/went beyond existing technologies or used them in a new way
- You are up-to-date on your accounts
What does this mean for FinTech?
FinTech has exploded into the public consciousness over the last five years. The likes of Bitcoin and other cryptocurrencies have stimulated the belief that financial industries are ripe for disruption. Although technological improvements have driven the financial industry forward for decades, the new age of FinTech is clearly something different.
FinTech businesses are generating investment to help them achieve specific tech advances which are geared to help their users even more. R&D tax credits can also provide a large cash boost to help businesses invest more into projects that will give them a competitive edge. Any development work where your personnel face considerable technological challenges, where the solution is not publicly available or not readily deducible from the outset, has the potential to qualify for the R&D incentives. Sample qualifying activities include:
- Development of new technologies, solutions, architectures, bespoke integration designs, protocols
- Making noticeable improvements to existing systems. Improvements might be in the areas of performance, scalability, availability, and security
- Redesigning existing systems using fundamentally different technologies
We’ve created a quick test to help you find out if you’re eligible for R&D tax credits, or one of the other government incentive schemes. Take the test here.
Example of R&D
One of our clients provides insurance services in a wide range of sectors, and as part of this process, they must collect and analyse large sets of data. When first acquiring new clients, the company are required to import data from legacy systems in different data formats into their home server. However, in one project, they had no way to efficiently extract this information and could only process structured data (e.g. in excel spreadsheets). Their previous system was also not scalable and numerous errors were present in their imported data.
Our client chose to use a cloud-based platform (Azure) to build a system that could handle aggregating data from 20 different source systems into a useable format on their own home server. As there was no readily available module within the public domain to perform this task, our client had to design a new module to suit their needs. They had to carefully consider and test several programming languages before deciding upon one suitable for the building of the module. The module was then built to be performed in batch by multiple systems in parallel. This allowed for the extraction of data to take place overnight, resulting in a huge productivity improvement. Development was also done on the module to improve usability and allow AI to assist in the processing of the data.
According to the latest HMRC R&D Tax Credit Statistics, the average SME claim is £57,228 (2019) and the average RDEC claim (for large companies) is £632,931 (2019). Typically, because of our experience and understanding of the R&D tax credit legislation, our average claim is much bigger than the industry standard. The best way to understand how much money you can claim is to book a free consultation with our team. They will discuss qualifying projects and provide you with a claim estimate.
You do not need to work with us or another R&D tax adviser to submit a claim but doing so can hugely increase your chance of success and optimising the value. R&D claim preparation for FinTech is a technically demanding process, and as industry specialists, we are key in helping companies in this industry to quantify, support and maximise R&D claims. We have the technical knowledge, expertise and key relationships to make sure you receive the full amount of benefit you are entitled to. Whilst you might want to save costs by not working with an R&D tax adviser, the reality is that it will likely cost you more – both in time and money.
“The software and financial services expertise within Kene Partners enabled us to swiftly identify qualifying projects ensuring that all technical details were examined. When we read the technical report, it was clear that our work and any technical terminology we used had made sense to the Kene Partners team” said Alastair Lukies CBE, CEO and Founder of Pollinate.