What Retailers need to know about R&D
The recent lockdown is significantly affecting our high street retailers, as more people turn to ecommerce alternatives. Despite these challenges, there are things our retailers can be doing to improve their cashflow – one of which could be taking advantage of the Government’s R&D tax relief schemes.
Many retailers don’t realise that the activities they are carrying out could make them eligible to claim R&D Tax relief. There is a general misunderstanding that this area of tax relief is only available for those companies carrying out a trade within industry or manufacturing – however, this is not the case. R&D tax relief remains widely underclaimed but can make a significant difference to the tax position of any eligible business.
So, which businesses can claim?
The guidance used by HMRC states that R&D relief is available for “companies seeking to achieve an advance in science and technology through the resolution of scientific and technological uncertainties.” However, when it comes to applying this in practice, companies often assume that their activities do not meet this criteria and miss out by failing to claim.
R&D tax relief claims can be made retrospectively for the previous two years, so there are considerable amounts of cash to be unlocked by innovative companies, with corporation tax savings worth up to 25% of the qualifying costs.
Retailers often qualify for R&D tax relief:
Retailers are often a rich source of qualifying R&D but many do not recognise it. Most R&D in this field arises from software development. The key point for R&D claims based on software developments is that the software should be modified substantially beyond its existing capabilities i.e. simply configuring existing software to meet your commercial requirements is unlikely to be R&D if the underlying software is not advanced in any way.
Whilst ecommerce sites using well established technology are unlikely to qualify for R&D relief, there are many areas where retail companies can see qualifying R&D activities taking place, such as:
- Customer recognition and content personalisation
- Augmented reality, try-before-you-buy capabilities
- Customer authentication, data management and site security
- Website developments e.g. chatbots, voice search functions
- Integration with stock control systems
- Fulfilment- interaction with third parties
- Real time stock management across various platforms
- Pricing, promotions and payment technology
The simplest way to claim
It is crucial to engage with an R&D specialist who fully understands the legislation and guidelines as to what activities do and do not qualify for relief to ensure your company accurately assesses its ability to claim, and that any claim is maximised.
Many companies overestimate the time impact on the company to prepare and submit the claim. An efficient R&D specialist will:
- work with you to minimise the amount of time that you need to spend on the claim
- liaise with the company’s ‘competent professionals’ – a two hour meeting should be sufficient for the R&D specialist to obtain the information required for most claims. The company will also need to provide some financial cost information, typically mostly salary costs, but this should be straight forward.
- produce a technical report that is submitted to HMRC along with the Corporation tax return but only after you have approved it.
For any retailer who has never previously considered making an R&D claim, or has claimed in the past but may not have maximised the claim, now is an excellent time to (re)consider making a claim. The Radius team at Shorts are well positioned to help you with R&D claims as featured on the Chamber’s website. This includes a free 30-60 minute consultation to determine if you are eligible to claim.
The team includes an ex-HMRC R&D Inspector and all the team are vastly experienced in R&D tax relief claims to ensure the R&D claim is both robust and maximised to its full potential.
Contact Scott.Burkinshaw@shorts.uk.com or any member of the Radius team on 0114 2671617.