In my opinion, the definitions of eligible R&D and eligible costs are reasonably broad. To keep things simple, can you answer yes to the following questions?
If you can answer yes to these 3 questions then chances are, you have a good chance of being able to claim R&D Tax Credits.
2. How do I generate robust documentation to support my claim? And, why bother?
Documentation for your R&D Tax Credits claim is key to adding value in different ways and can often make a difference on the amount you are able to claim back.
Ideally, the documentation should include details of: how much time your people have spent on research and development, including, staff time, subcontractors, contractors, temps and agency staff.
If you run trials or prototypes, a record of consumables is usually a good idea and to record the cost of materials used for R&D separately as they are purchased or used. A simple spreadsheet for this is fine.
Why bother? Put simply, because this will be the evidence for your claim. You need to prove what you have done and how much has been spent.
3. Confusion between what is defined as an SME and the difference in criteria between large company scheme (RDEC)
To help define the two:
You are eligible for the SME scheme if you have less than 500 employees in your company and/or group and less than £100m turnover.
And, you are eligible for the RDEC scheme (formally Large Company Scheme) if you have over 500 employees in your company or group or more than £100m turnover.
For more details about the two schemes, click here.
4. I haven’t got time to make a claim.
The average claim can take around 4 weeks to process by HMRC and unfortunately, tax relief claims always involve paperwork.
With R&D Tax Credits, you need to explain what your projects are setting out to accomplish and count up the costs. As this is critical work, it is sound business practice that these activities will already be being recorded.
R&D claims impact the tax paid by your company, group companies and joint ventures in the current period, prior period and future periods, therefore it is worth putting in the effort to maximise your claim for the return. Also, it’s often forgotten or not known that you have two years after the end of the relevant accounting period to make a claim, which means you can still claim now for prior periods. So don’t rush it and make it count!
5. Will I need expert knowledge of the process to make a successful claim?
You won’t need expert knowledge, but you will need some standard of knowledge on what you are expected to submit.
Should you use an expert?
Firstly look at how much you could claim vs how much you are likely to be charged. If the fee seems like it’s bigger than your claim is likely to be, surely that’s too much and you may be better to submit it yourself or work with your accountant.
Why not check out our R&D Tax Credits Calculator to give you a better indication so you can make an informed decision. Click here to access our calculator.
Within R&D tax credit frameworks, there exist varying degrees of guidance, each with distinct purposes. These are ‘Meaning of Research & Development for Tax Purposes: guidelines’, 'CIRD Manual (Corporate Intangibles Research and Development)' and ‘Guidelines for Compliance’
There were some important announcements made regarding the future of the R&D tax credits schemes both in structure, operation and who can benefit as well as wider investment in R&D in specific sectors.
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