Industries like engineering and manufacturing are innovating all the time. Engineers solve processing challenges. Product developers reformulate products. Technical teams run trials to improve yield, texture, stability or shelf life. Yet, this kind of work is rarely thought of as research and development. Instead, it\u2019s called \u201ctroubleshooting\u201d, \u201coptimisation\u201d, or \u201cjust meeting a customer\u2019s brief.\u201d<\/p>\n\n\n\n
But from a tax perspective, activities like these involve experimentation to resolve uncertainty, which may qualify them as R&D for tax purposes.\u00a0If a project does <\/em>qualify as R&D, it\u2019s eligible for R&D Tax Credits<\/a>, a government incentive that can give you up to 35% of eligible R&D expenditure.<\/p>\n\n\n\n The problem is that if companies don\u2019t know that there\u2019s R&D happening within their own walls, they also don\u2019t realise that they\u2019re missing out on tax relief. To make matters worse, when activities aren\u2019t initially recognised as R&D, the work is often not very well documented. Without evidence, tax relief claims become all the more unlikely.\u00a0<\/p>\n\n\n\n This means that far too many eligible companies in Ireland are missing out on tax credits. Not because they\u2019re not inventive enough, but because they don\u2019t have the processes in place to capture the \u201chidden\u201d R&D that\u2019s happening.<\/p>\n\n\n\n Money is lost, opportunities for growth are missed, and businesses can\u2019t optimise their processes to make their innovation more efficient.<\/p>\n\n\n\n In this article, we explain why so many companies miss out on R&D Tax Credits, and how adopting \u201cLean Thinking\u201d can uncover hidden R&D and help to optimise their innovation. We do this by introducing our Overall Innovation Capture (OIC) framework, which can be used to optimise innovation processes and maximise R&D claims.<\/p>\n\n\n\n Founders and innovators tend to see R&D Tax Credits<\/a> as a growth opportunity. Any money that\u2019s claimed can be used to fund new hires, new machinery, or even new R&D projects.<\/p>\n\n\n\n Chief financial officers (CFOs), however, will look at tax credits through a lens of risk, While the financial relief would obviously be welcome, many companies hesitate because they don\u2019t want to risk making a mistake and facing an audit from Revenue.<\/p>\n\n\n\n But it\u2019s also in a company\u2019s financial interest to claim the relief they\u2019re entitled to. R&D should never be invisible (if it is, it is a huge, missed opportunity), so processes need to be in place to consistently and defensibly identify and capture eligible activity.<\/p>\n\n\n\n the 1950s, poor productivity at Toyota led to the creation of Lean Thinking, which turned the The same logic can be used to make innovation and eligible R&D activity more visible. To give CFOs the certainty they need to claim R&D Tax Credits, we can use a simple diagnostic model called Overall Innovation Capture (OIC). Like OEE, OIC looks at three stages where innovation value can be lost:<\/p>\n\n\n Weaknesses at any of these stages can create value leakage, where eligible R&D projects are either missed entirely or qualifying activities and expenditure fail to make it into the final claim.<\/p>\n\n\n\n But the issue isn\u2019t just that R&D Tax Credits can go unclaimed (although we\u2019d argue that missing out on a financial benefit is a big problem), it\u2019s that if innovation is invisible within an organisation, it can\u2019t be optimised. It also means that opportunities for technical learning, capability development and making experimentation and innovation more efficient are missed.<\/p>\n\n\n\n Perhaps the greater problem is that most companies don\u2019t have any clear process or system in place to measure their innovation at all. In this case, even highly innovative organisations may capture only a fraction of the innovation occurring within their operations.\u00a0<\/p>\n\n\n\n At Leyton, we help our clients uncover hidden R&D activity. We take the innovative work your team has already done and turn it into real business value through R&D Tax Credits<\/a>.<\/p>\n\n\n\n We\u2019re here to do all the hard work for you: identify eligible activities, gather the paperwork, and build the claim from start to finish. Using our in-house team of technical and accounting experts, along with our deep understanding of Revenue\u2019s requirements, we\u2019ll make sure your claim is accurate, well-evidenced and that no eligible R&D activity is missed.<\/p>\n\n\n\n We also work with our clients to build their understanding of how claims work, so they can put the right processes in place to unlock greater value from future R&D claims. Our client, Engineering Design Consultants<\/a> (EDC), said:<\/p>\n\n\n\nWhy are companies hesitating to claim R&D?<\/h2>\n\n\n\n
compliance and audit defensibility. They may (quite rightly) ask:<\/p>\n\n\n\n u003cliu003eCan this work be classed as Ru0026amp;D?u003c\/liu003eu003cliu003eHau003cemu003eve we documented our activities so that we know what to claimu003cbru003efor?u003c\/emu003eu003c\/liu003eu003cliu003eDo we have the evidence to satisfy Revenue?u003c\/liu003e <\/ul>\n <\/div>\n <\/div>\n <\/div>\n<\/div><\/section>\n\n\n
What Lean Thinking teaches us<\/h2>\n\n\n\n
struggling automaker into a global production powerhouse. Lean production systems introduced metrics such as Overall Equipment Effectiveness (OEE) to help manufacturers understand how well they\u2019re using their resources. Instead of asking whether machines were productive in general, OEE broke performance into measurable components. Once losses were visible, companies could then systematically improve them. <\/p>\n\n\n\n
<\/a><\/p>\n\n\n\nMeasuring R&D with Overall Innovation Capture (OIC)<\/h2>\n\n\n\n
\n u003cliu003eu003cstrongu003eu003cmark class=u0022has-inline-color has-luminous-vivid-orange-coloru0022u003eIdentification: u003c\/marku003eu003c\/strongu003eHow much technical work is recognised as innovation?u003c\/liu003eu003cliu003eu003cstrongu003eu003cmark class=u0022has-inline-color has-luminous-vivid-orange-coloru0022u003eDocumentation: u003c\/marku003eu003c\/strongu003eAre the results from experiments and trials recorded in a way that creates usable evidence?u003c\/liu003eu003cliu003eu003cstrongu003eu003cmark class=u0022has-inline-color has-luminous-vivid-orange-coloru0022u003eConversion:u003c\/marku003e u003c\/strongu003eHow much innovation is successfully claimed via Ru0026amp;D Tax Credits?u003c\/liu003e <\/ul>\n <\/div>\n <\/div>\n <\/div>\n<\/div><\/section>\n\n\n
How Leyton can help<\/h2>\n\n\n\n