How to prepare for an R&D tax credits claim

F.Initiatives, Technical guidance - May 2018

If you work on innovative projects in technology and science, you may be able to claim R&D relief. This is something that can be claimed by a wide range of businesses in order to develop an advance in their industry or conduct necessary research. You can even claim on projects that are not successful. To claim for R&D tax credits, you need to explain how your project looked for an advance in the field of technology or science. You also need to show how an expert in the field could not easily work out your project, how you had to overcome an uncertainty, and how you went about doing this. With that in mind, read on to discover how to prepare for your R&D tax credits claim.

how to claim r&d tax credits


Know which scheme you qualify under

One of the first things you need to do when preparing for your R&D tax credit claim is to determine which scheme you qualify under. This is either going to be the RDEC scheme or the SME scheme. You will fit into the latter category if you have fewer than 500 staff and you have either 86 million EUR gross assets or 100 million EUR turnover. If your business is bigger than this, you will file your claim under the RDEC scheme. In terms of qualifying expenditure, both schemes are similar. However, the SME scheme tends to be more lucrative because the calculations differ. This is why it helps to have a professional at hand who can help you to navigate the scheme that is applicable to your business.

Figure out what qualifies and what doesn’t.

Once you know the scheme your business comes under, you then need to determine what qualifies for R&D tax relief and what doesn’t. After all, the last thing you want to do is unintentionally raise a red flag at HMRC, which could lead to an enquiry into your business. So, what does qualify? HMRC lists four qualifying categories. These are as follows: R&D consumables, subcontracted R&D, external staff, and direct labour. Just to make matters confusing, there are some exceptions to these categories, for example utilities, software licences, and payments to clinical trial volunteers. A lot of business owners make mistakes when it comes to filing their claim, and one of these errors is claiming directors as subcontractors. This is not allowed. Another error is claiming for the HMRC tax year, rather than your company’s financial period. Also, remember to file qualifying development as ‘intangible assets’, instead of ‘tangible assets.’ The latter is much more complex.

Don’t reuse a previous claim for R&D tax credit

A lot of business owners make the mistake of believing they can reuse a previous claim for research and development tax credit. This is not the case. HMRC want you to think about the eligibility of your qualifying research and development expenditure and activities every time you make a claim. Therefore, each claim needs to be unique. Nevertheless, while you cannot reuse a claim, a single project can certainly span numerous years, which means that a project may feature on more than one R&D tax relief claim.

Choose the right project

Once you’ve dealt with what qualifies and what scheme you fall under, you need to consider the actual work you have carried out. Ensure you choose the correct projects to claim for when submitting your technical narrative. In most cases, more than one project will be included in a claim.

Seek professional assistance

This is probably the most important step of them all. It’s vital to seek outside assistance because R&D tax credit claims can be very complex. We’ve already mentioned a handful of mistakes made when claiming for different aspects of research and development. R&D tax credit experts will not only eliminate errors, but they can help you to be savvy with your losses in order to maximise your claim. They will also be able to help you understand whether your company is linked to another business, and if so, how this impacts your claim. They will also ensure your claim is expertly constructed; that it’s written from a technical prospect, it’s simple, absent of jargon, and includes any failures that will demonstrate how complex the project is.

As you can see, there is a lot that needs to be taken into consideration when preparing for an R&D tax credits claim. The best thing to do is get in touch with a specialist firm who can prepare your claim and ensure you get the maximum R&D tax relief you are entitled to. This is where F. Initiatives comes in. We are a team of experienced R&D Tax Credits consultants with a proven methodology for funding innovation for a wide range of businesses. Contact us today on +44 (0) 207 653 1921 for more information.

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