Planning to claim for R&D? Then avoid these 3 key mistakes
4 August 2021
If you’re within an engineering, scientific or IT company, you’ve probably heard about the R&D tax credit scheme. You’ve probably been called a few times by different companies claiming they can prepare a claim for you cheaply and easily, and you’d get back a large chunk of what you’ve invested for R&D. So, is there any truth in the cunning sale speeches?
Yes, HMRC does offer an R&D tax relief scheme (actually, more than one), and it’s relatively generous, so you can be reassured that most of those calls were not a total scam. There are, however, several things to consider (and maybe avoid) when thinking about applying for the scheme. Let’s have a look at three of them…
1. Don’t leave it to your accountant
You’ve now decided the scheme’s for you and you want to apply. You discuss with your accountants, and they tell you they’ll apply for you, saving you from going to R&D specialists.
However, to correctly apply for the R&D scheme, you can’t just ‘edit the numbers’ in the tax computations. HMRC wants to see proof of the exact research and development that was carried out. This requires a good understanding of the HMRC definition of R&D, the technical work done, and the production of a technical report to demonstrate it. Furthermore, there are very detailed rules on what can be included in the claim and what can’t. Most accountants are very cautious as they don’t want to risk costly mistakes. As a result, your claim could be 50 to 70% smaller than what it would have been if processed correctly. The money lost in this process far exceeds what it would have cost you to work with a competent R&D specialist like Fortus.
2. don’t forget to check if regulations have changed
The regulations for the scheme, called CIRD (Corporate Intangible Research and Development) are written in a way that’s open to interpretation. HMRC has been known for changing the interpretation of the rules even though most CIRDs haven’t changed in years. Furthermore, with Brexit, HMRC has shown signs that more radical changes to the scheme are coming. An example of this is the introduction of the CT600L, a four-page supplementary form that needs to be submitted along with the tax return when making an R&D claim. So, if you apply for the scheme, make sure to be up to date with the regulations.
3. is your claim traceable?
Whichever way you decide to proceed with your claim, keep track of what work was included in the technical report, and what costs you claimed. If HMRC decided to check the claim, you need to be able to produce evidence of the work carried out and of the cost incurred. Therefore, it’s good habit to keep track of the projects carried out in each financial year, the relative employees involved and all other eligible costs.