Research and development (R&D) can boast a range of advantages for your business, but what happens when your R&D project doesn’t achieve its end goal?
Of course, failure in the pursuit of innovation can be costly for a business, with a return needed on any time, money and resource invested. With all of this in mind, what’s the best course of action when an R&D project fails? Let’s explore…
The good news
So, you failed to innovate a new process, tool, system or product. The good news? Providing you met other eligibility criteria, you’re still entitled to R&D tax credits. Why? Because failed R&D is still R&D!
It’s objectively stated in the current UK government R&D tax relief guidelines that R&D still takes place regardless of whether or not the goal of your project was fully realised. This means you’re able to claim back on associated expenses and mitigate some of your losses - result!
Claiming for failed R&D
Claiming tax credits for a failed R&D project follows the same standard process as any other R&D claim. Remember: you can retrospectively claim R&D claims for as far back as two years, providing you meet other fundamental criteria, such as:
The takeaway
The R&D tax credit incentive was established with risk-reward in mind.
Breaking new ground in the search of innovation always carries an element of risk, and, for many businesses, the extent of this risk can often be too sizable a hurdle to overcome. That’s why R&D incentivises behaviours, not results. By reducing the risks of innovation through financial subsidisation regardless of the end result, more businesses and industries are actively encouraged to evolve.
So, what lessons can be taken away from a failed R&D project?
Well, the main takeaway is that the pros of R&D always outweigh the cons. With the risk of losses significantly reduced, you should look to pursue R&D wherever possible, regardless of past success. Innovation breeds innovation - again, regardless of end result - meaning you should view failed R&D projects as valuable learning opportunities. Where did you go wrong and what can you do differently next time?
Adopting the age-old mantra of ‘if at first you don't succeed, try and try again’, R&D enables low-risk experimentation to the benefit of your business - whether through the valuable lessons learned from failed projects or the innovative achievements of a successful project.
Need a hand filing a claim for your failed R&D project? Why not get in touch with the experts at Lumo? We’re always happy to help!