If you’ve spent lots of cash on research and development (R&D) in recent times, it may well be the case that you’re eligible to claim a substantial portion of that back through what’s known as R&D tax relief.
This scheme, operated by Her Majesty’s Revenue and Customs (HMRC), is designed to reward companies who faced and attempted to solve technical uncertainties in their sector. Even if the attempt was unsuccessful, you still may be able to claim.
And with some companies receiving 33p in every pound spent on R&D in tax relief, it really is worth considering as a route to take.
In this post, we’ll take a look at the process you need to follow if you want to apply for this lucrative and worthwhile tax credit.
Writing a technical narrative
Possibly the most important part of your claim will be the “technical narrative” you’ll need to write in order to demonstrate to the tax authorities that your claim is worth approving.
In this document, you’ll be required to set out a persuasive and convincing case, and you’ll need to include certain key chunks of information. These include lists of technical challenges faced, how much time and cash your company used to address them, and the eventual results of these efforts.
It’s also recommended that you include a case study or two in your technical narrative. By pinpointing precise examples of your company’s research efforts, you’ll be showing the taxman that you fully comprehend what the R&D tax credit rules are and that you’re confident in your company’s eligibility for the relief.
There’s no one way to produce a technical narrative, and it tends to vary from company to company. But it does need to be clear, and any waffle or misunderstandings can cost your claim dearly.
That’s where the assistance of professionals such as the team at F.Initiatives can help: we have over 20 years’ worth of experience helping companies with their R&D tax claims, so having us onside can really boost your technical narrative’s chances of approval.
Identifying a “competent professional”
Firms which claim R&D tax relief are often – although not always – working in cutting-edge industries, and as a result, they often have top-tier talent like software developers or scientists on their teams.
When it comes to applying for tax relief, this can be a real advantage for your business as it means that they can be assigned as the “competent professional”. The role of the competent professional is to go over any tax credit claims and use their professional knowledge to pick out where your company came across technical uncertainties.
Essentially, choosing the right person to be a competent professional is like having an in-house expert who can bolster the claim. It’s a good idea to spend some time producing a professional write-up of this team member’s expertise, as this gives their analysis further credence and legitimacy.
Formats need to be clear
As with any bureaucratic process, it’s important that you get the small, procedural bits right, as well as the conceptual and strategic elements. This might seem like a nightmare, but when tax refunds of up to 33p in the pound are on offer, it’s worth doing!
You’ll need to make sure the claim information is sent alongside the CT600 Corporation Tax return form, and while there is no exact requested way of doing it, you should include spending breakdowns, explanations of how you arrived at the figures you’ve included, and more. For a full list, contacting advisors at a firm like F.Initiatives is advised.
HMRC may well come back to you and ask for more evidence to be sent over if they feel that’s necessary, so you should always try and get it right on the first go in order to save everyone’s time.
Getting your timings right
The timeframe involved is remarkably generous, so you won’t have to worry too much about getting everything submitted to a tight deadline. However, it does pay to be organised in advance, as there’s a lot to get through in order to maximise your chances of a successful claim.
If your claim is approved, it will be discounted from your corporation tax bill, allowing your firm to keep more of the cash in the company bank account.
Companies submit their own Corporation Tax returns, and this usually happens 24 months after your accounting period is over. Your accounting period will normally be specific to your company and will run for 12 months at a time. For R&D tax relief, you’ll have the entire Corporation Tax return period to make your claim for any R&D spend which happened during that accounting period.
In short, you’ve got two years after the end of the year in which the spending happened.