R&D Relief?

[Sosoomii]

Hi all,

Long time browser, first post. I have been an engineering contractor for about 10 years and have recently been undertaking some research and development activities outside of my fee paying work. This amounts to several hundred hours of my time and maybe £10k in sub-contracting the building of prototypes. There is no guarantee that the prototype will work (as well) as intended, though obviously I hope it does and I can then start full production.

My questions are:

1. Can I somehow claim my time for R&D relief given that I can’t see how to keep timesheet records for this activity and anyway my income is mostly dividend with a small salary, so any nominal hourly rate would be v small. My accountant has suggested I could set up a second ltd co and bill that one from the first, but I don’t understand how that will work?

2. Does the subcontracted prototype build qualify for R&D relief of is that capital expenditure? Does it matter if the project fails and never gets to production?

Do other contractors have experience of doing R&D outside of client based business?

Many thanks in advance.

[northernladuk]

Are you really doing R&D or building a product.

You need to clarify exactly what R&D constitutes and what you have been doing. In many cases what people call R&D doesnt really match the definition.

[Sosoomii]

Are you really doing R&D or building a product.

You need to clarify exactly what R&D constitutes and what you have been doing. In many cases what people call R&D doesnt really match the definition.

Definitely maybe R&D. I appreciate that it is possible to wrongly classify product development as R&D but I’m confident in this case that the work is genuinely R&D.

Consider this example, which is similar but not my actual case:

You are an experienced aerodynamics professional running your own business providing contracting services to NASA, Boeing etc over the years. You have an idea (unproven) that might be a step forward in low speed flight and lead to better model aeroplanes.

Okay, it’s not the most important piece of tech in the world, but after you review countless text books, journals etc you confirm that this is a novel idea which has not previously been explored and the details of which are not readily obvious to a professional. If it works you will have the basis for the best model planes/gliders around and would hope to sell enough to make your money back in 3 years or so. If it doesn’t, it will still fly but be nothing special in an already crowded market. There is genuine uncertainty whether the idea has merit or even how to analyse the idea accurately, so new analytical techniques have to be developed and validated (by testing a prototype).

An IT example might be that you have a brainwave for a new spreadsheet app with novel features that you think has a big advantage over Excel. You’d have to do some work to develop the idea and satisfy yourself that it was better. I think I’d call that R&D rather than product development?

But as it is self funded the hours that go into it don’t really have a monetary value, so it doesn’t seem possible to,take advantage of the R&D relief on offer?

[northernladuk]

An IT example might be that you have a brainwave for a new spreadsheet app with novel features that you think has a big advantage over Excel. You’d have to do some work to develop the idea and satisfy yourself that it was better. I think I’d call that R&D rather than product development?

But as it is self funded the hours that go into it don’t really have a monetary value, so it doesn’t seem possible to,take advantage of the R&D relief on offer?

I strongly disagree that is R&D. To make something better for a start isn't R&D. Even making something new you are manipulating an existing code/applications to do something different. That's what software is for. It's not answering any scientific question, it's just been created using existing languages etc to do something similar but better. Every single app being written could be classed as R&D if that were the case.

We've been over this plenty of times and there are people that disagree with me so there is no right answer.

[Sosoomii]

I strongly disagree that is R&D. To make something better for a start isn't R&D. Even making something new you are manipulating an existing code/applications to do something different. That's what software is for. It's not answering any scientific question, it's just been created using existing languages etc to do something similar but better. Every single app being written could be classed as R&D if that were the case.

We've been over this plenty of times and there are people that disagree with me so there is no right answer.

I disagree with you too, if there is uncertainty that a professional cannot readily answer, the project to,overcome that uncertainty is research. For the sake of argument, assuming I’m right do you have an opinion on my original questions?

[northernladuk]

I disagree with you too, if there is uncertainty that a professional cannot readily answer, the project to,overcome that uncertainty is research. For the sake of argument, assuming I’m right do you have an opinion on my original questions?

Provide a solution isn't overcoming an unkown. As I say, every software project ever sets out to provide a solution.

[Sosoomii]

Provide a solution isn't overcoming an unkown. As I say, every software project ever sets out to provide a solution.

Of course not, and I didn’t say it was. You don’t know the details of my claim and I don’t want to share them as they are not relevant to the questions I have. Surely you don’t disagree that it is possible that company that provides contractor services can also do R&D outside of client sponsored business?

From gov.uk -
To get R&D relief you need to explain how a project:

* looked for an advance in science and technology
* had to overcome uncertainty
* tried to overcome this uncertainty
* could not be easily worked out by a professional in the field
Your project may research or develop a new process, product or service or improve on an existing one.

[Ploptimus]

Of course not, and I didn’t say it was. You don’t know the details of my claim and I don’t want to share them as they are not relevant to the questions I have. Surely you don’t disagree that it is possible that company that provides contractor services can also do R&D outside of client sponsored business?

From gov.uk -
To get R&D relief you need to explain how a project:

* looked for an advance in science and technology
* had to overcome uncertainty
* tried to overcome this uncertainty
* could not be easily worked out by a professional in the field
Your project may research or develop a new process, product or service or improve on an existing one.

I’ll hold your beer NLUK while you reply to ‘I refuse to give you any detail relating to my query but I disagree with your answers so far’

[Sosoomii]

I’ll hold your beer NLUK while you reply to ‘I refuse to give you any detail relating to my query but I disagree with your answers so far’

Oh please, I might have been researching the efficacy of face masks and injecting mice with coronavirus for all that it matters to the original question. Are you saying that it is impossible to run a ltd company business with an element of privately funded research and development?

[northernladuk]

This link might help with the detail

http://www.hmrc.gov.uk/gds/cird/atta...impleguide.pdf

Your accountant is probably best bet on what can and can't be claimed if you do want to go through with this.

I've had a look back and we've a number of threads on R&D which all come down to an discussion about whether it really is R&D and next to nothing going further in to what can be done which I think speaks volumes.

That's the best I can do sorry.