What Are The Main Types of R&D?
Research and development (R&D) refers to projects that companies carry out in order to gain knowledge in their field. This new scientific or technological advancement is then used to create new or improved products, services and services which the company can then use or sell.
When many people think of R&D they tend to imagine laboratory technicians in white coats or large pharmaceutical brands carrying out testing. Of course this type of work would be included, but it’s actually far, far wider than that. R&D in fact goes on in pretty much every successful company at some point, regardless of its size, professional area or sector.
There are typically three different types of R&D: Basic Research, Applied Research and Development Research.
Basic research is generally where the objective is to fully understand one particular subject area, rather than in practical application. It’s concerned with the pursuit of a particular scientific advancement, but at the same time has no specific commercial aims. To achieve maximum benefit from this kind of research, companies need to be consistent and dedicate plenty of resource to it longer term.
In terms of beneficial outcomes, basic research aims to give a company a better knowledge and understanding of a specific problem and how to tackle it. It provides the first steps in developing a strategy and finding a solution, whilst also giving the company a better understanding of current trends in the market.
Applied research is about the investigation work necessary in acquiring new knowledge to create commercially marketable products and services. It’s concerned either with determining possible uses for the results of previous basic research, or in finding new ways of achieving a specific goal.
The end result of applied research is that companies can use it to work out how they’re going to meet both customer and industry requirements. It therefore forms the second step in the R&D process, enabling the company to identify solutions, resolve any issues, and to take advantage of any detected industry trends.
Development research involves a systematic piece of project work that uses existing knowledge gained from research or practical experience for developing a new product, service or process. In this way, engineers and manufacturing teams can bring ideas to life, before these new products are sold in the marketplace. New processes brought about by development research can also be used by the company in more effectively and efficiently marketing their products.
Sounds expensive - is there any government help towards R&D costs?
Yes! There is.
The government has for many years strongly encouraged Irish businesses to invest in research and development in order to grow. Companies that are undergoing innovative projects, expanding their operations, growing their sites and taking on more staff are crucial for a strong economy. In turn, stronger economies tend to have lower inflation rates and lower unemployment, which of course means more tax money for the Revenue’s coffers.
With this in mind, since the early 2000 the Irish government has offered all Ireland-based companies a helping hand towards R&D costs. This is in the form of R&D Tax Credits and R&D Grants.
What are R&D Tax Credits?
R&D Tax Credits allow profitable Irish companies engaging in R&D work to claim a reduction in their Corporation Tax. For SMEs this reduction can be as much as 25%, in addition to the standard 12.5% rate offered - so 37.5% in total. With projects and eligible costs being extremely broad, as you can imagine even fairly small claims can add up to many thousands of euros.
The scheme is open to any Irish company in any sector (including loss-making ones who can receive the benefit as cash instead). Eligible projects must essentially involve some element of innovation, for example creating a new product, service or process, or markedly improving a new one. The project in question must also look to make a technological or scientific improvement in the field in which the company operates. Although R&D Tax Credits can still be claimed if the project is unsuccessful, its original aim should not be easily solvable by another competent professional working in the sector.
It’s an excellent scheme, offering a highly valuable financial boost. However, applying for R&D Tax Credits is often a complex process. The onus is on the company applying to not only outline their R&D work but to justify it (through a strict set of criteria), and why it should attract the relief.
This is why it’s so important you use the services of highly skilled and experienced R&D tax consultants like us at Myriad Associates. Our team is made up of R&D specialists and accountants on hand to personally guide you through the application process for a successful, fully optimised claim. Find out more about us and why we’re so successful on our About Us page.
And what are R&D Grants?
R&D grants have for many years been a vital way for SMEs and start-ups in particular to gain funding for their innovative activities. It’s highly competitive, but the rewards can be high. However, applying for R&D grant funding isn’t necessarily a straightforward process, and can be very time consuming especially if you’ve not done it before.
An R&D grant application of the highest quality will successfully describe the technological, commercial and financial benefits of the planned activities in a detailed and compelling manner. Like any competition, only the very highest quality applications will be successful, and again this is where the team at Myriad Associates can help. Find out more on our R&D Grants page.
If you would like to speak to us about anything we’ve raised in this article, please do contact our team on +353 1 566 2001 or use our contact page.
Don’t forget our excellent Tax Cloud portal for businesses. It’s specially developed by the experts at Myriad Associates to guide you through the R&D tax relief claims process and help you submit . It’s a highly accurate tool, offering a great value solution that’s easy to use - can your company afford to miss out?
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