How to Plan an Effective R&D Strategy
Developing new products, services and processes is vital to the growth of a business. Customers want the newest, best version and the only way to provide that is through innovation. A robust innovation culture can set your company apart and ensure continued success.
What is R&D?
Research and development (R&D) is the creation of a new or an appreciable improvement to a product, service or process. It is important to business as it can improve efficiency and reduce costs, as well as encouraging companies to thrive in competitive markets.
It is often mistakenly believed that R&D is solely seen in innovation-heavy industries like pharmaceuticals or software, however, all industries participate in R&D activities in the development of consumer goods.
The Irish government has put various incentives in place to encourage investment in R&D, from grants to tax relief. R&D Tax Credits are one of the most popular, available to companies completing ‘basic research’ or ‘applied research’.
Basic research, sometimes called pure research, looks to investigate a subject in-depth and build a body of knowledge around it. It often has little benefit for a commercial or practical application but can then be built upon later. Basic research is often conducted by researchers within universities or other research organisations.
Applied research uses knowledge previously acquired and puts it to a specific commercial objective. It is more precisely inquisitive, looking to answer particular questions and find solutions. R&D tax credits are often claimed by companies operating in this area of research.
What is the R&D process?
In general, the R&D process follows these basic steps:
Coming up with ideas
The first stage is having a solution that needs to be developed. Sometimes a team will come together to brainstorm, understanding and itemising issues in the industry and considering how the company can offer solutions, whittling down ideas to core areas of concern. Other times, the solution will present itself without brainstorm by direct suggestion from a team member. This is where having a strong R&D culture comes in handy, as all employees feel valued, encouraged to look for new solutions and then present them.
Focusing on specific ideas
Initial ideas will then be refined, as the selection is often pretty random and broad. This is when the ideas are sense checked and preliminary market research is conducted, to ensure the idea is both feasible and original.
Developing the idea
Once the idea(s) has been selected and a vague plan is put in place, the team will begin market research, considering the market readiness. If the idea(s) is deemed to have the potential for success, it will then begin the development process.
Prototypes and trials
Researchers collaborate closely with product developers and other teams to work out the process of converting an idea into a tangible, market-ready product. During this process, the product will become more complex and its marketing strategy will become more pressing.
Bringing to market
Once the product begins to take shape, the R&D team splits out into the relevant areas to bring it to marketplace. Regulatory aspects take a more important role and the team begins working on meeting criteria required for launch, as well as working to budget.
Having gone from a simple research question, the product is now ready to meet its biggest challenge yet: the launch. At this stage, the product is regularly evaluated (which will likely continue indefinitely). Redesigns are common long after launch, and the whole thing could even be scrapped depending on performance. Hopefully, the product is a success, bringing in new business and providing the funding for another round of the R&D process.
How can you support the R&D process?
R&D Tax Credits are another way to source funding for your innovation projects. This Revenue-backed incentive was designed to encourage innovation in Ireland. They provide relief for companies who are seeking an advance in science and technology and allow companies to factor R&D into their growth strategies.
R&D tax credits essentially offer a 25% credit for qualifying costs of your R&D project, which can be used to reduce a company’s Corporation Tax (CT) or, in some cases, as a cash credit paid in instalments.
You can apply for R&D tax credits through the Revenue Online Service (ROS), although the process can be a little daunting. The application needs justification for the technical advancement and details of the qualifying expenditure, project-by-project. With only a year to claim following the end of the accounting period within which the R&D took place, we recommend getting in touch with a R&D tax specialist who can make the process less painful, secure your entitlement and maximise your claim.
Talk to the experts at Tax Cloud
Expertly put together by the skilled team of accountants and consultants at Myriad Associates, the Tax Cloud calculator can give you a sense of how much you could be entitled to. Tax Cloud is a self-guided portal, entirely supported by the experts at Myriad Associates, as a cost-effective alternative to full consultancy fees.
If your company is based in Ireland and you would like an informal discussion about any aspect of R&D Tax Credits, feel free to get in touch with us today on +353 1 556 2001 or use our contact page.
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