Claim R&D Tax Relief for a Failed Project

Tax relief for failed R&D projects

When it comes to claiming R&D tax relief there is no doubt that this is easier to do when a project has been successful. But what about those projects where you didn’t get the results that you were hoping for? Innovation necessarily involves the potential for failure and unsuccessful R&D is still R&D – that’s why it’s so important to ensure that you include even the projects that didn’t work out when you’re ready to make a claim.

Overcoming technical uncertainty

One of the main purposes of R&D is to overcome technical uncertainty – but when you set out to do this there are no guarantees that it is going to be a success. R&D tax relief is not designed just to reward those projects that have a successful outcome but every venture where the risks that innovation necessarily requires are being taken. Although some less experienced R&D tax credits advisors might try to avoid including unsuccessful projects – because they can be more complex to add to a claim – you’re missing out by doing this. Not just increasing the size of the claim to include the amount of that project but also in being able to show HMRC the volume of ideas that your business is trying and testing. It’s risk-taking that makes it possible to take steps to overcome technical uncertainty and this is what is being rewarded by R&D tax relief.

R&D tax relief is often most useful for failed projects

Another reason to ensure that you’re claiming R&D tax relief even for failed projects is that this is often where the relief is the most necessary. If you need to revise or review a project and then try again, R&D tax relief can help to mitigate the financial impact of a project that has not worked out. It can also help to embed a culture of innovation in your business and make investing in innovation a much more sustainable option. In fact, HMRC even states in its aims that this kind of relief is not just for successful projects. It says, “not all projects succeed in their aims.” What counts is whether there is an intention to achieve an advance in science or technology, not whether ultimately the associated scientific or technological uncertainty is completely resolved, or resolved to the degree intended.”

It’s not all about headlines.

It’s true that those groundbreaking innovation projects that succeed are the ones that make the headlines. However, they are often only the final iteration in a series of steps – many of which were initial innovation failures. Plus, loss-making businesses are available for the highest relief under the R&D tax relief scheme – 33% of qualifying expenditure – which proves that the scheme is not just designed to reward R&D success.

The short answer is: yes, you are still able to claim R&D tax relief for a failed project. In fact, you’re encouraged to do so.

Looking to claim R&D tax relief from previous projects? Read our article on “Claiming R&D Tax Credits from Past Periods”

Advance your R&D tax credits through Sprk Capital

Sprk Capital R&D tax credit loans can support you with access to capital on either an ad hoc or quarterly basis – it’s entirely up to you and what works best for your business. The process is easy, fees are straightforward.

Learn more about how you can make your R&D funding stretch further on our “For Businesses” page.

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