R&D Tax Credits, Grants and VGTR: A Glossary of Terms
If one of your clients has a UK company that undertakes any research and development activities then it may well be eligible for R&D Tax Credits. Rolled out in the year 2000, R&D Tax Credits are a UK government-backed scheme devised to encourage innovation by helping to finance some of the costs involved. This can be either in the form of a reduction in a company’s Corporation Tax bill, or as a lump sum credit. Additionally, there’s the option of a one-off non-repayable R&D grant (popular with many businesses that are just starting out) as well as additional reliefs for businesses working in the sphere of entertainment and video games.
The process for applying for each of these reliefs can be notoriously complex and time-consuming. Not only do companies need to tell HMRC what specific R&D has taken place, but also why they believe they are eligible for the relief in question. Getting it wrong can be very costly, not just in time but money too, not to mention the stress of any HMRC enquiries along the way.
This is why we strongly recommend that accountancy firms dealing with R&D clients speak to us at Myriad Associates, so that we can support you in helping your client effectively. However, with so much jargon and technical language out there regarding R&D Tax Credits, grants and Video Games Tax Relief, we thought it would be helpful to put together a glossary of common terms to refer to. Obviously many of these words have familiar day-to-day meanings, but the glossary is specifically in reference to R&D.
Applied research: This refers to any original investigations that took place with a view to acquiring knowledge to achieve a new aim or objective. It would include things like pilot plant and prototypes.
Basic research: Theoretical or experimental work undergone primarily to gain new knowledge.
Commercialisation: This is regarding the taking of a process or product from the early ideas stage to commercial deployment.
Commercial demonstration: A demonstration that’s carried out as a follow-on from a technology demonstration. The point of a commercial demonstration is to prove that a particular process or product is eligible to be brought to market.
Commercial deployment: This refers to the point at which a process or product can be launched profitably on the market solely via commercial enterprises, regardless of the involvement of any public subsidies.
Demand pull: Demand pull refers to emerging needs and market environments that incentivise innovative processes and products. It can refer either to public sector measures and policies, including subsidies, or emerging market opportunities that are designed to promote innovation.
Demonstration: An activity that shows practically how viable a process or product actually is.
Deployment: Deployment is the use of a process or product for commercial and/or practical purposes.
Development: A programme of work undertaken to produce new products, devices or materials to bring about a new process, service or system, or to substantially improve one that already exists.
Early deployment: The early use of a process or product for commercial and/or practical purposes.
Feedback R&D: This refers to R&D that has been conducted with the aim of solving a specific technological or scientific problem that has arisen due to a process or product being deployed or demonstrated.
Full-scale deployment: Commercial deployment where a product or process has established a new market or has increased its market share.
Incremental innovation: This refers to an improvement in cost, performance, design, reliability, etc. to an existing commercial process or product without any substantial difference in end-use service provision.
Innovation: This could be a new product, process or significant technological improvement in a process or product that already exists. An innovation has taken place if it has been used within a production process (process innovation) or brought to market (product innovation). Processes and products can be new or improved from any country in the world, or simply new to the market, depending on the context.
Invention: A new technical or scientific idea, and the means of its accomplishment or embodiment. So that it can be patented, an invention must be have utility, be non-obvious and have an element of novelty.
Market formation: This refers to any activity designed to enhance, exploit or create niche markets as well as the early commercialisation of technology in wider markets.
Pilot plants: Pilot plants are built with the intention of obtaining experience and compiling engineering as well as other data.
Prototype: An original model that was built to include all the performances and technical characteristics of a new process or product.
R&D Grants: R&D grants are a very popular method of achieving the finance that businesses (particularly SMEs) need to carry out their scientific or technological research or development programmes. It helps to cut down risk as well as speed up the service or product development process. There are a number of UK and EU grants available to companies seeking to engage in the development of pioneering and innovative products. To find out more about R&D grant funding in more detail, please take a look at the R&D grants page on our website.
Research: Systematic work taken on in order to increase the stock of knowledge, including boosting the knowledge of man, culture and society.
Research and development (R&D): Creative work undertaken in order to gain knowledge that will be of benefit either to a company or to wider society. This knowledge is then used to create new applications.
Technology demonstration: This refers to a rough idea, prototype or otherwise incomplete version of a product, process or system that’s currently still at the design stage. The technology demonstration is created as proof of concept with the key purpose of showcasing its possible applications.
Video Games Tax Relief: The VGTR is a valuable tax incentive offered by the UK government. It allows video games studios specifically to claim either a tax rebate, or a cash repayment, having invested money on developing a video game. Again you can find out more on our VGTR page.
Need further advice?
The team at Myriad Associates are experts in all areas of R&D, including tax credits, grants and VGTR. If you would like to ask a question or clarify an issue, please feel free to contact us on 0207 118 6045 or use our contact page.