R&D tax relief can have a significant benefit on companies no matter the size or sector. In some cases, R&D tax relief is a lifeline for businesses. While research and development can take place in every industry, we’ve listed the top 5 industries that have an excellent chance of submitting a successful claim and why.
The healthcare industry largely depends on high-level research and development. In healthcare, the goal is ultimately to improve services, products and treatment, therefore R&D is the number one focus. Qualifying R&D activity within the healthcare sector could be developing software solutions for electronic media records, testing and creating new product prototypes or finding ways to reduce side effects of pharmaceuticals, to name a few. Over the past few months activity like such will have notably increased as a result of the pandemic. More organisations will have carried out research for a vaccine and hired volunteers to take part in clinical trials. These are key qualifying activities as noted by HMRC. ZLX has worked with various healthcare businesses who were unaware that they had actually worked on several projects that qualified for R&D tax credits.
Oil and Gas
Oil and gas are two of the most used and most important products in the world – we use it for almost everything. Investing in research and development to drive innovation and create new and improved technology is just one way oil and gas companies succeed in such a demanding industry. With traditional forms of energy becoming harder to find, it’s becoming more and more crucial for oil and gas companies to develop new technology and this is done through research and development. Companies within this sector tend to claim back costs for supplies and raw materials consumed during the R&D project or third-party contractor costs.
The manufacturing sector is actually the single biggest benefactor of the R&D tax credit scheme. The annual amount claimed in this sector currently stands at £770 million. One of the main reasons for this is down to the fact that a lot of qualifying projects take place within this sector on a daily basis. These projects usually attempt to develop or improve an existing material, device, product or process, or it seeks a technological advancement. Companies mostly claim for development rather than research on projects, for example: product development using computer aided tools; developing second generation or improved products; and developing processes that would meet increasing regulatory requirements. Companies that are involved in aerospace, automotives, electronics, packing or engineering often work on these type of projects.
Software and IT are constantly evolving and adapting which makes this sector a primary target for R&D claims. Research and development usually takes place within a software development project when the aim is to achieve an advancement in computer science or information technology. Introducing new software development tools or developing innovative methods of capturing, transmitting, manipulating, and protecting data are common qualifying R&D projects, providing that the company claiming carried out certain qualifying activities in the project. Qualifying activities would include analysing, designing and developing the technology or testing the process or software. Software developers consider these projects as standard everyday tasks, but most of the time companies can claim back thousands of pounds on the costs spent.
Farming and Agriculture
Financial margins within the farming and agricultural sector is becoming smaller, meaning farmers are continuously trying to enhance the efficiency of their production process. Despite being an industry with plenty of qualifying R&D activity, it’s also one of the top industries missing out on R&D tax credits. According to HMRC’s latest Research and Development Tax report, less than one percent of SMEs within this sector regularly claim. Common projects within this industry such as developing new machinery or processes to reduce waste and improving soil formulation usually involve qualifying R&D activities. Much like software developers, farmers just view these activities as a part of the job and are missing out on money that could really benefit them.
Has your company carried out R&D activity?
Remember, R&D can take place in every sector, not just the five listed above.
Get in touch with one of our consultants if you believe your company has worked on a project that qualifies for R&D tax credits. At ZLX, we don’t just help process claims, our goal is to maximise it. The average benefit for SMEs claiming R&D tax credits is £64,560. The average return figure for the claims processed at ZLX is £77,000.