R&D tax credits for the financial services sector

Why invest in R&D?

R&D tax credits are a government incentive designed to reward UK companies for investing in innovation. The R&D scheme allows claimant companies that carry out qualifying R&D activities to mitigate their tax liability or receive a payable cash credit from HMRC. 

Investing in R&D offers several benefits, including: 

• Give your business a non-repayable cash payment or reduce your company’s tax burden, supporting cashflow. 
• Help encourage your company to allocate resources towards R&D, fostering innovation.
• Elevate the UK to a leading position in global R&D and innovation efforts. 

Submitting a successful R&D claim can be used as a valuable source of cash for businesses to invest in accelerating their R&D, hiring new staff, and ultimately growing.

Examples of R&D activity in financial services

The financial service industry has undergone a period of disruption and digital transformation, with innovation and R&D going hand in hand. The pace of technological advancement has accelerated, and financial services providers are becoming more technology-enabled. Investments that are eligible under the R&D scheme include software and technology developments, including developments driven by compliance with changing regulations, and developments to address strategic business imperatives, such as core transaction solutions.

Broadly speaking, any development where you face considerable technological or scientific uncertainty, where the solution was not readily deducible to a competent professional in the field, has the potential to qualify for the R&D incentives. However, businesses need to be aware that HMRC is opening up many more enquiries than in the past. Therefore, businesses need to be certain the work they’re claiming fits with the guidelines and that the claim accurately translates the eligible projects into qualifying costs. 

We are seeing HMRC querying machine learning and AI-based projects as ineligible projects which apply known technologies. As many financial services businesses rely on data analytics and model development to create their software solutions, this type of data-based development work can form a major elements of the claim. To try and avoid any queries, we can help you define your project correctly to ensure it does meet the definition of an appreciable advance in technology. However, businesses must be ready for a random enquiry, and this means that preparing a claim at the current time will take more time and effort to create an audit trail for the claim process.

What costs can you include in your R&D financial services claim?

Identifying the right projects to claim is the first step in creating a robust claim. The next part is to ensure that only qualifying costs are being picked up. So, what are the costs that may qualify for relief?

• Agency staff - costs for those directly or indirectly involved in R&D
• Employee costs - directly or indirectly involved in R&D 
• Materials and consumables - items used in the R&D project
• Subcontracted R&D expenditure
• Software - used by the R&D team
• License fees relating to software
• Cloud computing services (after 1st April 2023)
• Utilities - fuel, power, or water

Many businesses are unaware that claims can be made for some capitalised expenditure and miss out on significant extra benefits. We can assist in identifying any qualifying capital expenditure and advise on how to maximise your R&D claim benefit.

How we can help

We're here to fully support you in preparing and claiming R&D tax credits. Should you choose to get specialist R&D support from Buzzacott, we will:

• Identify what R&D scheme your business qualifies for
• Complete a comprehensive review of your R&D financial services activity, working with you to ensure you’re maximising your claim
• Prepare a claim that minimises your potential exposure to a HMRC enquiry
• Aim to fast-track your claim and avoid delays in receiving your benefit
• Guide you through the whole claim process or on certain aspects of the claim

We’ll also work with you to assist in identifying other sources of R&D support and help with planning your R&D strategy, taking into account incentives and grants that might be available, from patent boxes to innovation grants. By offering this holistic view of the innovation support needs, we can assist throughout the business lifecycle. Our R&D team at Buzzacott support businesses throughout the year, not just when it’s time to prepare the next R&D claim. 

We take time to listen to your business to understand the goal you’re trying to achieve with your innovation, so we can help you overcome problems and challenges along the way. By being open and honest, we aren’t afraid to challenge our clients to make sure that your claim is correct, and you’ve optimised the benefit. We want to help you understand your eligible activities without holding you up, so you know how to build a robust R&D claim.

Get in touch

If you would like to speak to one of our R&D experts to find out more about how we can help, please get in touch via the form below or call +44 (0)20 7710 3330.