Mention research and development (R&D) to most business professionals and their minds are immediately transported to a laboratory full of scientists frantically striving for their next eureka moment.

It’s a common misconception and one which has led to R&D tax relief and tax credits being among the most under-claimed tax incentives currently available to UK businesses.

The truth is that research and development activity does not have to be ‘blue sky’ innovation nor does it have to consist of creating new technologies.

Any activity linked to uncovering and enabling the development of new products, processes and services are also fully eligible for R&D relief and these are activities which most companies undertake in some form or another.

R&D tax relief is a government incentive to reward companies that undertake research and development and it’s one of HMRC’s real success stories.

So which industries are eligible?

The answer is almost any business, from manufacturers to retailers, could potentially have a claim.

The issue is that many business owners and financial directors have a nervousness around what can and can’t be allocated as R&D activity.

The wording of HMRC’s legislation around R&D doesn’t help and, if anything, it fuels the perception that R&D activity requires pioneering innovation or majestic feats of engineering.

The reality is that many Gwent-based companies are actively delivering R&D activity without realising it.

So what could R&D tax relief mean to your business?

For SMEs the potential tax relief is 225 per cent on any expenditure on eligible R&D activities, as well as the ability to claim tax credits from HMRC on any losses enhanced by R&D expenditure. This means these credits are available to any company, whether profitable or not.

For any profit making business which identifies R&D expenditure of £100,000, HMRC will allow £225,000 to be offset against taxable profits. With current corporation tax set at 20 per cent, this equates to an extra £25,000 tax deduction.

The HMRC regulations also provide options for loss making companies that can show R&D expenditure. In many cases companies who can demonstrate eligible R&D expenditure can legitimately claim cash back against it.

So what are the common barriers to businesses claiming this relief? Many businesses believe the process of identifying and claiming their R&D tax relief to be too arduous. This is simply not the case. Claiming R&D tax relief can be a quick and painless process with the support of a qualified tax expert. Once a business’ qualifying areas of R&D are identified and the first claim is made; the process of implementing future R&D reporting systems can be straightforward. As a result, monitoring future claims can be made efficiently in accordance with the HMRC guidelines.

Claims can also be made retrospectively, meaning relief can be claimed on any eligible R&D activity during the past two accounting periods.

The remit of R&D activities is broader than you think but the chances are that if you company can answer yes to any of the following it may be eligible for R&D tax relief.

• Develop new or improved products, processes or prototypes?

• Employ technical people?

• Encounter design or development problems?

• File patents?

Remember, R&D isn’t just for the men in white lab coats. With the right advice the process of making a claim can be very straightforward so why miss out on a readily available cash incentive?