Tehsin Khan, GrowthPad Ltd

1. Claiming Research & Development
Tax Relief In 2021

2. Nice To “meet” You
● Tehsin Khan
● Founded GrowthPad in 2017
● Tax Author - 3 books
● Family man, father of 3 and husband

3. Summary
● What is R&D tax relief?
○ Introduced in 2000 to encourage UK companies to invest building knowledge
based economy and improve productivity
○ Funding that works through the corporation tax system
■ Companies can reduce corporation tax liabilities
● What is the purpose of this talk?
● What I want from you

4. What Is R&D Tax Relief?
● If a business spends £100 on an expense, how much can we claim as an expense?
● Imagine spending £100 but then getting £230 as an expenses. This is what R&D tax can
do for a business!!

5. Why would the Government want to give an
additional expense?
Increase
Productivity
Hire Employees
Increase Tax Collection

6. Who Can Claim R&D Tax Relief?
1. Qualifying Business
2. Qualifying Project
3. Qualifying Costs

7. Qualifying Business
1. Must be a Going Concern
2. Subject to corporation tax

8. Qualifying R&D Projects
1. Aiming to or achieving an advance in science or technology
2. Overcoming technological or scientific uncertainties
3. Must not be readily deducible by a competent professional

9. Which companies do you think of when I say
R&D?

10. 1. Advance in science or technology
Aiming to or achieving an advance in science or technology
● Not blue sky innovation nor groundbreaking

11. ● making an appreciable technological or scientific improvement to an existing
product, material, service, device or process. For example making an existing
product smaller, faster, stronger, efficient, cheaper and so on.
iPhone
12 Pro
Max
(records, zoom,
LiDAR, screen)
iPhone 12

12. An advance includes:
● Trade secrets
○ Paint manufacturing sector - large multinationals (Dulux) have the know how and
resources to create all in one paints, whereas a small specialist paint
manufacturer may not have the knowledge of how to do this so they undertake
R&D to create it.
● Failed Projects

13. 2. Overcoming technological uncertainties
Scientific/technological uncertainties exist when:
● the knowledge of whether something is scientifically possible or technologically feasible is not available nor
readily deducible or
● the knowledge of how to achieve it in practice is not available nor readily deducible
A technological uncertainty exists when there is not an established path to successfully complete the project and
technical challenges exist. For example, the process of successfully developing a product may involve development
based on trial and error. i.e develop, test, analyse results, redevelop and retest.

14. 3. Not readily deducible
Must not be readily deducible by a competent professional

15. Example Real Projects
£225,000
Developed software to house 3D animations and created complex
database for large manufacturing companies. R&D specifically for
software scalability, prevent piracy, security, speed of download.
Software
Development
Description Cash Value
Sector
£60,000
Manufacturing
Automation of production lines, creating a divert value system
saving time and costs of cleaning tanks, developing tools to speed
capping process
£40,000
Paint
Developing new paints to replace leaded paints, created all in one
paint system (eliminating 3 layered paint process) and created
paints suitable for trains in India, complying with toxicity levels, burn
rate etc and product had to dry within Indian climate.

16. Non Qualifying Projects
● Software - front end development for aesthetics or user experience
○ Creating unique designs for an app
● Routine development - the developers have the know how to do create it
○ Engineer creating an extension of production line to make it longer
● Standard process of development - using tools to create something that the tools
were designed for
○ Using WordPress to create a website

17. QUESTIONS?

18. R&D Costs
● Staff cost
● Consumables - including materials and utilities
● Subcontractors
● Externally Provided Workers (EPWs)
● Software
● Clinical trials

19. Example
● Staff cost
○ John Kimble: £100,000 - 30%
○ Jack Slater: £80,000 - 45%
○ Mr Freeze: £65,000 - 80%
○ Dutch: £30,000 - 25%
○ Conan: £10,000 - 90%
● Consumables - £10,000
● MacBook Pro - £1,699
● Subcontractors - £16,000
What are the qualifying R&D Costs?

20. Answer
● Staff cost
○ John Kimble: £100,000 - 30% = £30,000
○ Jack Slater: £80,000 - 45% = £36,000
○ Mr Freeze: £65,000 - 80% = £52,000
○ Dutch: £30,000 - 25% = £7,500
○ Conan: £10,000 - 90% = £9,000
£134,500
● Consumables - £10,000 £10,000
● MacBook Pro - £1,699 - NOT QUALIFY
● Subcontractors - £16,000 £10,400
£154,900

21. Tax Computation
BEFORE R&D COSTS £
Profit before tax as per accounts 148,000
Add back: (Disallowed)
Depreciation Expense 85,000
Less: Capital Allowances (14,160)
Trade profit 218,840
Tax liability x 19% £41,580
AFTER R&D COSTS £
Profit before tax as per accounts 148,000
Add back: (Disallowed)
Depreciation Expense
Less: R&D Costs £154,900 x130%
85,000
(201,370)
Less: Capital Allowances (14,160)
Trade profit 17,470
Tax liability x 19% £3,319
SAVING OF £38,261

22. SME v RDEC
● 2 R&D tax schemes
○ SME
○ Research and development expenditure credit (RDEC)
SME
● 24.7% profit making
● Loss making - 33.35%
RDEC
● No subcontractor costs allowed (unless qualifying body or unincorporated business)
● Relief is approximately 10.5%

23. SME v RDEC
What is an SME?
● Employees 500 or less
AND
● Turnover < Eur 100mn
OR
● Gross Assets < Eur 86mn

24. Example 1
● Employees 800
● Turnover Eur 60mn
● Gross Assets Eur 30mn

25. Answer 1
● Employees 800 thus under RDEC

26. Example 2
● Employees 300
● Turnover Eur 120mn
● Gross Assets Eur 65mn

27. Answer 2
● Employees 300 - less than 500
● Turnover Eur 120mn - more than Eur 100mn
● Gross Assets Eur 65mn - less than Eur86mn
Thus, SME

28. When can companies claim?
● After first accounting period - usually 12 months but can be less and up to 18 months
● R&D tax claim in conjunction with accounts and corporation tax return
● Backdate claim - two years from end of an accounting period
○ Eg. y/e 31 December 2019 can be claimed up to 31 December 2021

29. Help To Identify Projects
Has the company in the last three years attempted or completed any of the following:
● created new or improved products, processes or services?
● developed any bespoke products, prototypes, developed modules, patterns or tooling?
● made any efficiency improvements to its processes through improvements of technology?
● developed its own technology, software or tools for its own use?
● experimented with new equipment or production techniques?
● implemented changes to the business processes or products to adhere to regulatory changes or to reduce
impact on the environment using technological improvements?
Did the company
spend any money on
salaries, outsourcing,
materials or software?
Eligible for
R&D tax relief
Yes Yes

30. Overview
● To qualify
○ Business must qualify
○ Project must qualify
■ Advance
■ Overcome technological/scientific uncertainties
■ Competent professional
○ Costs must qualify
■ Salary, subcontractors, EPWs, consumables, software, clinical trials
● Different R&D tax reliefs
○ SME - up to 33.35%
○ RDEC - c10.5%
● Claim within 2 years of the year end
● Loss making companies can claim

31. Contact details
Tehsin Khan
tehsin@growthpad.co.uk
07805 011061
www.growthpad.co.uk