Generous Research & Development (R&D) tax incentives are available to encourage innovation in the UK. If your information technology department is developing new products, processes or services, there is a good chance that you will be able to claim relief.

As the definition of (R&D) for the purposes of tax credit becomes more clearly defined it is apparent that many IT activities undertaken in the financial services sector will qualify for the relief. In North America, where the criteria for R&D qualification are virtually the same as, if not more stringent that the UK, many institutions have made successful, and substantial, claims for R&D tax credits.

The latest guidelines on the meaning of R&D make it clear that activities seeking to achieve an advance in technology through the resolution of technological uncertainties are R&D, provided that the solution is not readily available to, or deducible by, a competent professional working in the field. It is generally recognised that the UK financial services industry is at the forefront of technological innovation as issues such as market forces, security and regulation drive technical advance. Thus, any IT development work where the personnel faced considerable technical challenges has the potential to qualify for the enhanced tax relief. This takes the form of a 7.5% absolute cash reduction in taxes for eligible revenue costs or immediate tax relief for capital R&D expenditure.

For more information, download our brochure on R&D tax relief opportunities for financial services companies (70KB, PDF).