Our high street retailers have been significantly affected by the Covid-19 lockdown as consumers turned to ecommerce alternatives during that time. Despite the additional challenges they now face, there are things retailers can do to improve cashflow – one of which could be taking advantage of the Government’s R&D tax relief schemes.
We talk to many retailers who do not realise that the activities they are carrying out could make them eligible to claim R&D Tax relief. There is a general misconception that these sorts of tax relief are 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 impact on the tax position of any eligible business.
Which businesses can claim?
HMRC guidance 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 very often qualify for R&D tax relief
Retailers are often a rich source of qualifying R&D but many simply do not recognise it. Most R&D for retailers arises as a result of software development. The key point here 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.
Ecommerce sites using well established technology are unlikely to qualify for R&D relief, but there are many areas where retail companies can see qualifying R&D activities taking place. Examples would be:
- 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
What is the simplest way to claim R&D tax relief
It is important that you engage with an experienced R&D specialist who fully understands the legislation and guidelines. They will be able to assess your trading activities and ensure your company accurately assesses its ability to claim, whilst also making sure that any claim is fully maximised.
Whilst 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.
Claiming R&D tax relief is simpler than you may think. So if your business is making an ‘appreciable’ improvement in technology or science, you could join the thousands of innovative companies nationally that have already benefited from R&D tax reliefs.
To find out more, please contact a member of the Radius team and let us show you how easy it is to make your innovation pay.
- Radius case study - Penny Hydraulics Limited
- Download our guide to making a successful R&D tax relief claim
- Visit our resource library for more guides
- R&D Tax Relief
Looking for tips on how to save tax?
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