Get in touch:

Home/FAQs/Research and Development Tax Credit Claim

Research & Development FAQs

How do I make an R&D Tax Credit claim?

There are several elements to making an R&D tax credit claim and it is crucial that the whole process is completed accurately.

Why use an R&D Tax Credit expert?

The reasons for hiring an R&D Tax Credit expert are the same reasons why you employ any specialist: its saves you time, money and hassle, and gets the job done properly. A good R&D Tax Credit expert will obviously have experience and thorough knowledge of the R&D Tax Credit regulations. But they don’t exist in isolation. They will also have the skills to treat your financial life holistically and understand how R&D Tax Credits fit in with its broader spectrum.

Your R&D Tax Credit specialist should work with your existing accountant to maximise your financial position. They will know how to identify eligible R&D projects, find all the qualifying costs and use their industry knowledge to produce a strong, accurate claim.

If you are looking to change R&D tax adviser, the first thing you need to do is check that your contract has expired or that you do not have a ‘lock-in’ clause. You should tell them that you are moving to another company and they will work with your new R&D Tax Credit adviser to make the transfer as easy as possible.

When should I submit my R&D claim?

It’s a good idea to submit your R&D claim alongside your corporation tax return. This means that the amount of your tax relief is deducted from your tax bill and you pay the difference. You are allowed to apply for R&D tax credit after your tax return deadline. As long as all your other tax affairs are in order and paid, your tax relief will be paid accordingly. It is particularly beneficial for the cashflow of businesses who pay quarterly, to build their R&D submission to their overall tax calendar.

Which form do I need to submit my R&D tax credit claim?

R&D Tax Credit is a Corporation Tax relief, so you use the relevant section of your Corporation Tax Return (CT600) to submit your claim. The actual input box varies depending on which variant of the CT600 you are using, check the accompanying guidelines.

What supporting evidence do I need to include for my R&D Tax Credit claim?

HMRC supply a list of information that they need as evidence for your R&D Tax Credit claim. Unfortunately they have not issued a standard format on which to collect all this information.

To accompany the information on your tax return form, you also need to submit:

  • Description of your R&D projects and activities: this shows HMRC that you understand how R&D applies to your work and is explicit about how your projects are eligible for R&D Tax Credits by matching them to the criteria (Technical Narrative).
  • Expenditure: detailed breakdown of your R&D spending, by category. This shows that you are au fait with the rules of qualifying costs.
  • Methodology: basically ‘show your workings’ regarding how you decided what expenditure is eligible, with clear reference to the rules. This includes the effect of any capitalisation of R&D spending and/or any grants you may have sourced to support your project.
  • Records: explain the records you have kept and how you have used them to work out your R&D expenditure.

This evidence proves that you have given your application for R&D Tax Credits due care and attention. If you don’t provide any supporting documents you leave HMRC with way too many unanswered questions and are likely to trigger an enquiry in to your claim, if it is not simply declined.

I keep reading about the ‘technical narrative’, what is this?

The technical narrative is basically where you explain why your project is eligible for R&D, its journey over all the obstacles, what you used and the conclusion of your project (to date). It needs to be completed by a ‘competent professional’ (see next question) who can effectively assess which activities within the project are R&D and which are everyday. Again, HMRC have not provided a structure for this document and it can be a tricky to communicate technical information in a way that a non-expert (the tax inspector) can understand.

Who is considered a ‘competent professional’?

In the context of your R&D Tax Credit claim, a ‘competent professional’ is someone that is part of your company who has the knowledge, qualifications, skills and experience to decide which of your projects qualify for R&D tax relief. A professional CV detailing their expertise should be part of the technical narrative.

They have a pivotal role in the preparation of your R&D claim, including, but not limited to:

  • Explain the technicalities of your specific innovation and the work that directly relates to it.
  • Demonstrate which aspects of the whole project are eligible for R&D tax relief and which parts of the project are everyday.
  • Figure out which project costs qualify for R&D.

My R&D project is carrying over to next year, so can I just re-submit the same R&D Tax Credit form?

No, a cut and paste R&D claim form is definitely not advisable and is a very good way to trigger an HMRC enquiry. You are expected to submit a carefully considered individual claim each year. Many companies are working on R&D projects that span several years. This doesn’t mean that they reuse their previous year’s R&D claim paperwork. You are allowed to claim the qualifying expenditure on the same project over successive years and there may only be small changes to your methodology section. But your activities and their corresponding costs will be different year-on-year.

Can I backdate my R&D tax relief claim?

Yes, R&D tax relief claims can be backdated for two years from the end of the accounting period in which you did the R&D project.

This two year deadline is to marry up with the Corporation Tax 24 month rule. You have 24 months to make any necessary changes to your Corporation Tax Return after the end of its accounting period.

Start Ups follow the same R&D tax relief deadline

Your first accounting period is measured as twelve months from the end of the month you register with Companies House. Lots of companies want to align their accounting period more conveniently and so change their dates. This means that your first two accounting periods may be less than the full twelve months.

GET IN TOUCH

Logos - in aid of NSPCC and SSL accreditiation

In aid of NSPCCSSL Secure site
Call us: 0330 0539 112Send a message