Are you optimising team or player performance? You could be entitled to R&D tax credits
Research and Development (R&D) tax relief is often not thought of by those operating sports clubs. However, many of the activities undertaken to improve player performances would qualify as R&D activity and could lead to cash savings through tax credits.
Any scientific work, such as nutrition, injury inhibition and fitness improvements, where knowledge and player performance is being improved, has the potential to qualify for the enhanced tax relief. With improved technologies and detailed statistics available, such as distance run by each player in a match, speed of bowling or serving, and length of kicks, it is now possible to measure improvements in performance.
For small and medium sized businesses (SMEs) this takes the form of an additional tax deduction calculated as 130% of qualifying revenue costs and provides a net tax benefit of 25% for profitable companies. For loss making companies, a cash tax credit of up to 33.35% is available.
For larger companies (over 500 employees and either €100m turnover or €86m gross balance sheet) the benefit is reduced, but is recognised above the line, i.e. as an increase to operating profit. The effective benefit is 9.72% of the spend. For loss making companies, the 9.72% is available as a cash credit.
Capital spend on R&D (for example on new fitness rooms or training facilities) should also not be overlooked as there is an immediate deduction available for capital R&D expenditure. This gives a significant cash-flow benefit when compared to other allowances where, at best, the relief is given over 10 years, and in many cases, not at all.
Qualifying revenue expenditure includes primarily the salary costs (including employers’ NI, pension contributions and some expenses) of employees directly and actively involved in the R&D and also where undertaking certain supporting activities. Various other costs can also be included such as consumable items and a proportion of contract staff costs, software licences and power, heat and water.
While some countries have centralised injury, fitness and nutrition centres, the UK does not and this is generally in the hands of individual clubs.
As such, for a number of years football clubs have become increasingly sophisticated in their use of sports science and many have dedicated sports science teams including leading specialists and often collaborate with local universities.
Understanding your industry
Activities that qualify for R&D tax relief must relate to a trade, which includes “medical research that has a special relation to the welfare of workers employed in that trade”. As such many activities could be eligible for R&D tax relief, in particular in four specific areas:
- Nutrition optimisation
- Effects of nutrition on fatigue perception, performance, muscle damage and immunity
- Food, drink and vitamin supplements and the effect of body composition
- The key in any case is tailoring the diet and hydration to the individual player to optimise their performance.
- Work by the club’s nutritionists
- Fitness improvements
- Physiology and training methods to improve speed, stamina, recovery etc
- Methodologies to reduce muscle metabolites and pH levels and increasing oxygen uptake without impacting performance
- Work by the fitness and condition coaches
- Injury inhibition
- Injury inhibition without loss of performance
- Work on prevention of specific injuries, such as those to the anterior cruciate ligaments
- Treatment of injuries on the field (the “magic sponge”) to enable continued playing but without any longer term risk
- Work by the club doctors, medical staff and sports scientists
- Talent identification
- Studying the impact of genetics on performance and the influence of systematic training and development.
- Identifying, monitoring and nurturing talented players.
- Work by the scouts and academy staff
How we can help
The R&D team at MHA can assist by ensuring that all activities that could qualify for the relief are identified, assessed, documented and where appropriate, claimed. The team has considerable experience of claims, not only in sports but also in numerous other sectors and have developed a cost effective methodology, working with you to prepare a robust R&D claim with minimal disruption to your core business. We will also leave you with a working model such that you are in a position to prepare subsequent claims in house, if required.
Over the years we have developed excellent working relationships with the relevant inspectors at HMRC, thus enabling claims to be reviewed and agreed in the most efficient manner.
If you would like more details regarding the above or R&D tax credits generally, please contact us on 0207 429 4147 to be put in touch with your local MHA office. More information about the services we offer and the national team can also be found on our R&D webpage.