Everything You Need to Know About R&D Tax Claims

1. Everything You Need to Know About R&D Tax Claims The world of research and development (R&D) tax claims can be quite daunting and difficult to understanding. This guide helps breakdown R&D tax claims to provide you with all the essential information you need. What is a R&D Tax Claim? An R&D tax claim allows businesses to claim up to 30% of R&D related costs from the UK Government. The money is paid as a corporation tax refund at the end of each financial year. Businesses can file a R&D tax claim even if a project fails and does not achieve the initial desired outcome. Qualifying for an R&D Tax Claim To qualify for an R&D tax claim, you must prove to HMRC that the R&D carried out meets their detailed criteria. This can be broken down into two categories – technology and finances. Technology To meet the technology criteria an R&D project must provide an advance in science and technology. While it can be difficult to determine if you qualify, typically things to consider are cost and innovation. If your project achieves something that others have not achieved or if you acquire new knowledge then it can be considered as R&D. If you spend £100k or more to develop a product in your project then it will likely be considered R&D. Finances A key component of qualifying for R&D tax relief is proving to HMRC that you have spent money developing your project. For your R&D tax claim to be accepted you must prove the money was spent on any of the following: • PAYE staff • Subcontractor who delivered the project • External contractors who were paid a daily rate • Materials that were used and couldn’t be sold at full price • Software licenses required to deliver the project It’s also important to note to qualify for a R&D tax claim you must:

2. • • • Have a UK company Must have spent money to build technology that meets the criteria above Spent money during the last two financial years on the project If you think you qualify for a R&D tax claim you can either contact a specialist to file your claim or you can choose to handle your own claim. If you decide to process your own R&D tax claim you must take the following steps: • Write a technical narrative • Put together your financial calculations • Amend CT600 and file with HMRC After a R&D tax claim has been filed, it is passed onto the HMRC R&D unit where the claim is reviewed by an inspector. If a claim is well prepared it will be accepted immediately and you can expect to receive money as soon two weeks, although in most cases it is likely to take 4-6 weeks to process. If a claim is lacking some details, you can expect to be asked some follow up questions. It is quite unlikely that a claim will be rejected unless it is suspected that you have deliberately committed fraud. In these extreme cases an enquiry will be launched into your accounts and penalties will be imposed. Although an R&D tax claim can seem straightforward it is usually recommended to contact a specialist to help guide you through the process.