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For the R&D tax credits to be available, in addition to meeting the SME criteria, your business will also need to:
FIRSTLY – be undertaking qualifying R&D activities.
SECONDLY – Have spent on R&D activities.
For the purposes of the scheme, R&D is a project which seeks to achieve an advance in overall knowledge or capability in science or technology through the resolution of scientific or technological uncertainty.
Innovation can apply to any sector where technical progress can be shown. This could involve development of anything from software through to business processes.
The burden is on your company to evidence ‘innovation’. However, the rules do not require you to evidence you have been successful in your R&D or to divulge how you are carrying out your activity. What is sought is the attempt at innovation against technical uncertainty.
Innovation of course means different things to different sectors. There is no bright-line test as to what innovation is.
Experience of the R&D tax credit scheme and what is likely to be accepted as innovation will be invaluable when assessing your eligibility under the scheme.
It becomes a matter of understanding HMRC’s stance on what is classed as ‘innovation’, and effectively documenting and presenting evidence to support your claim.
At ETC Tax we are experienced in handling client’s claims from start to finish. Get in touch if you have any queries.