The benefits of including R&D in your business plan

Research and development (R&D) is an activity carried out by businesses and other organisations that leads to innovative new products or improvements to existing products, services or processes.

R&D in the fields of science or technology is important for businesses because it can lead to several advantages including improved efficiency, competitiveness, financial performance and sales.

In this article we outline how to include R&D in your business plan, so you maximise the benefits. 

The benefits of including R&D in your business plan

Carrying out qualifying R&D activity and including it in your business plan can lead to several benefits, including:

Increased innovation

Focusing on R&D leads to new products, processes, and services, which can help your business to develop a unique selling proposition (USP), become a leader in the market and gain an advantage over your competition.

Investing in R&D can also help contribute to creating a culture of innovation within your business and encourage the sharing of new ideas from everyone working for your company.

Improved competitiveness

R&D can help businesses improve their efficiency and effectiveness, making them more competitive in the marketplace.

Efficiency can be improved by the development of better and streamlined production methods which help to lower costs and reduce waste. R&D also contributes to boosting business and employee productivity by developing tools and technology that speed up processes.

R&D also helps businesses to improve customer satisfaction by developing products and processes that better meet their needs. This can lead to increased spending from existing customers and the attraction of new ones due to a stronger value proposition for your business in the market.  

Access to R&D funding and tax reliefs

Delivering R&D qualifying projects gives your business access to R&D tax reliefs as well as grants and other funding.

R&D tax relief is a Government tax incentive designed to encourage and retain innovation in the UK. How much you can claim depends on the amount of money you spend on qualifying R&D activity. Examples of eligible costs are staff expenses, including employers NIC and pensions, UK-based subcontractors, software and consumable items.

The UK Government, regional bodies, local councils, and other organisations provide grant funding for R&D activity.

Government R&D grants for business innovation are provided through Innovate UK, one of seven disciplinary research councils that make up UK Research and Innovation (UKRI). The UK is also an associate member of Horizon Europe, the EU research and innovation programme.

Enhanced profitability

R&D is important for business profitability, because it can lead to increased sales and profits, as well as improved financial performance.

• By developing new or enhanced products or services you can better meet the needs of existing customers or open up new markets and increasing sales.
• By focusing on improving and streamlining systems and processes, you can reduce your costs and increase your profit margin.
• By developing new intellectual property for your business and gaining patents and copyrights, you can create valuable financial assets.

How to include R&D in your business plan

For your business to fully benefit from R&D activity, you should integrate it in your business plan. It will help you stay on track with your innovation activities and maximise the benefits. Writing a business plan with R&D in mind will also help you to secure R&D funding from investors.

Steps for including R&D in your business plan

The role of R&D in your business

Outline the role that R&D will play in your business such as product development, process improvement or improving competitiveness.

Your R&D objectives

Outline the purpose of your R&D activities with short- and long-term goals for what you want to achieve. As we explain in this guide to setting effective objectives, they should be specific, measurable, achievable, realistic and time-related.

Your R&D strategy

Outline details for the specific R&D projects you will carry out, including the methodologies you will use and the goal of the project.

Your R&D team

Outline details of people involved in your R&D, including their expertise and the role they will play. The people could include employees, contractors, partners and academics.

Your R&D budget

Outline your costs. Examples include equipment, materials, salaries, facilities, software, testing and research.

You should also explain how these costs will be covered, such as innovation grants and R&D tax relief.

Your expected outcomes

Outline what you aim to achieve from your R&D activity, such as new products, improved processes, patents and savings, and how you will measure success. 

Types of R&D

The main types of R&D activity are:

Fundamental or basic research

This is experimental or theoretical work carried out to gain new knowledge of a specific topic, but usually without any direct practical commercial goal.

Applied research

This is research carried out to find practical solutions to specific problems.

Experimental development

This type of R&D involves using existing research to develop new or improved products, services, or processes.

Industrial research

This involves the development of new knowledge or skills with the aim of creating new products, processes or services.

Measuring the success of R&D

To measure the success of your R&D activity, consider the following factors:

• the resources you invested
• the efficiency of the process
• direct results, such as new products, improved processes and patent
• the broader impact on your business, such as sales from new products

You should link these metrics to your overall business goals to work out the return on investment. Regularly review how your activity is performing to ensure it remains relevant and aligned with your business objectives.

Important factors to consider before claiming R&D relief

Andy Coleman, of Tax Consulting by TaxAssist*, advises that “due to enhanced HMRC scrutiny of R&D claims and the subjective definition of what constitutes R&D activity, establishing your eligibility to make a claim is a significant hurdle”.

Andy adds that new claimants should remember that where the company intends to claim R&D tax relief for the first time, it must submit the claim notification form within six months of the end of the accounting period, in most cases.

The key takeaway for companies wishing to pursue a claim is to consider seeking professional advice to help check their R&D report for common mistakes. Andy advises businesses not to “overcomplicate their narrative, focus on the key eligibility criteria and avoid overstating staff apportionments”.

Get help with making an R&D tax credit claim

Tax Consulting by TaxAssist offers a comprehensive R&D service in the following steps:

1. Initial meeting and discussion regarding the R&D guidelines and qualifying criteria. This will include details of the information needed to fully assess the claim and assistance with HMRC pre-notification.
2. A review of the content received to ensure compliance and preparation of a detailed R&D report for attaching to the company return.
3. Tax Consulting by TaxAssist will guide your accountant through the process of submitting or revising the company tax return.

It’s best to work with experts when submitting an R&D tax relief claim to ensure the value of your claim is maximised and that it can be robustly backed up should HM Revenue & Customs challenge it.

To find out more, contact us today on 01234 331777 or use our simple online form.

 

* Andy Coleman has been preparing R&D claims since 2000 and is well versed to guide you through this complex area of taxation with assistance and review from other senior tax staff.

 

Last updated 28 May 2025 | First published 28 May 2025

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This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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