There are many reasons why a company is yet to claim R&D Tax Relief. You might be a new business, a start-up or a university spin-out; you might have recently come across the scheme for the first time; you may have previously thought you were ineligible, or you may have thought that claiming was too much work and you didn’t want to disturb the HMRC!
We understand that making your first R&D Tax claim can be like navigating uncharted waters. To make the process as easy as possible, here are our 5 top tips for making your first R&D Tax Credit claim:
Keep clear technical documentation
As part of a R&D Tax claim, you’ll need to provide a technical evidence report to showcase that your research and development activities solved non-trivial technical uncertainties; therefore, making them eligible for a claim.
To create a well-evidenced report, we need to present the main R&D activities that were ongoing in the year and justify why their costs can be included in the claim. It’s possible to put this detail together retrospectively, however it really helps to record your work and thought processes as you go. This doesn’t need to be onerous, as often internal documentation already exists (specifications, presentations, drawings etc.) for us to draw on at a later date.
Key bits of information to collect throughout the claim period:
- Project start and end dates.
- Timesheets of employees involved (to identify time spent on R&D).
- Details of any subcontracted R&D or agency staff brought in to help.
- The key technical uncertainties (challenges) faced and how you overcame them.
- Why what you’re working on represents an advance on an industry level.
TBAT can help you to put formal processes in place within your business to help with the recording of R&D.
Tag R&D related expenses using your accounting software
Many accounting software platforms allow you to make use of tags or labels.
To make the first claim as simple as possible, make use of this feature to easily identify what costs were attributed to R&D activities. This will allow you to work out how much of your expenditure can be claimed back through the R&D Tax Relief schemes.
Bear in mind, you’ll likely need to apportion some costs. This is to ensure you only claim for the proportion that was used to undertake R&D. For example, utility costs such as heat or power will need to be apportioned to account for how much energy was used to conduct your R&D projects.
Claim early
We encourage businesses to make a R&D Tax Relief claim early into their new financial year, as this allows them to receive the benefit of their claim much earlier.
Our recommendation is to engage your accountant early in Quarter 4 of your current financial year to begin preparing your accounts and your claim. Early in Quarter 1 of your new financial year, you can submit both your accounts and R&D claim to HMRC and receive your benefit in the same quarter – usually within 4-6 weeks of submission.
Make sure your CT600 is filled out correctly
After taking time to document and collate eligible expenses, the last thing that you need is for a simple error on your CT600 form or Tax Computation to mean that you miss out on £1000’s in R&D Tax relief!
Typical errors include wrongly utilising the R&D figures in the tax computation so missing out on the maximum benefit available, simply entering numbers into the wrong box, or confusing Uplifted R&D for Enhanced R&D.
Don’t go it alone
R&D Tax Consultants like us are here to help make the process of claiming as painless as possible.
After holding kick-off and information-gathering meetings, we can help to identify all of your eligible expenditure in the years for which you’re claiming. We’ll then work with you to detail both your technical evidence and financial report and also ensure that your CT600 and Tax Computation correctly reflect the R&D claim.
This article was written by Medilink EM Patron, TBAT Innovation.