Economy built on innovation

I’VE written here before about the opportunities afforded by the tax allowances introduced by HMRC on research and development, and the benefits businesses can get from investigating and utilising them.

The idea of ‘R&D’ immediately brings to mind an image of clever scientists in long white lab coats, developing products and processes of the highest complexity beyond the understanding of most mere mortals.

The tax system allows for a wider definition of research and development that most business managers would expect, which is not just wrapped up in scientific discovery, but applies to a range of manufacturing activities and staff costs.

Pre-conceptions such as this are still, in our experience, resulting in firms ruling themselves out of using the R&D tax allowance process before they’ve considered whether there’s a chance of ruling themselves in.

Take the construction industry, it’s a well-established one in which R&D would appear to have little relevance, and in the present economic climate, there can be an understandable reluctance in allocating resources to investigating what received wisdom suggests could be a wild goose chase.

In reality, the defined processes and performance guarantees construction firms are increasingly being asked to specify could encompass exactly the sort of activity that comes under HMRC’s definition of research & development.

The cherry on the cake for this is that the HMRC are encouraging companies to get involved – the taxman wants to give money back to your business – and the potential cashflow for construction companies battling in a challenging market provide an obvious imperative for firms to see what might be possible.

Such is the Government’s wish to increase the construction industry’s paltry average spend of 2.2% of sales on R&D (according to last year’s ultimate Business, Innovation and Skills (BIS) Department Research & Development Scoreboard), they’ve made case studies available on www.bis.gov.uk  website.

Anthony Andreasen is head of tax at RMT Accountants & Business Advisors Ltd – to contact Anthony please call 0191 2560500 or email advice@r-m-t.co.uk