The R&D tax relief scheme has seen significant changes in recent years, including new reporting requirements, changes to eligible expenditures, and the merging of the SME and RDEC schemes. These changes, paired with increased compliance activity from HMRC, mean it’s more important than ever to ensure your R&D claims are accurate and fully compliant.
Claire Astley, corporate tax director at PM+M, shares her top tips to help you navigate the process and maximise your claim:
Stay up-to-date on rule changes
To increase your chances of a successful claim and avoid issues with HMRC, it’s crucial to stay informed about the latest updates. From 1 April 2023, the relief rates were reduced, but data licensing and cloud computing costs were added as eligible R&D expenses. Additionally, since 1 August 2023, companies must submit an ‘additional information’ form digitally to HMRC for their R&D claim to be valid. More changes, including new rules on subcontracted R&D, apply to accounting periods starting on or after 1 April 2024.
Understand eligibility
Familiarise yourself with HMRC’s strict criteria for eligible R&D projects to ensure your work qualifies. Use tools like an eligibility checklist to streamline this process – read more about qualifying for R&D tax relief here.
Document your R&D projects accurately
Maintain detailed records of project timelines, technical challenges, specifications, testing procedures and costs. Accurate timesheets and project breakdowns are key to a successful claim. Read more about the importance of record-keeping here.
Work closely with ‘competent professionals’
The role of a ‘competent professional’ is vital to validate any R&D project (a HMRC definition can be found here). It is important to document (and demonstrate) that the project you are undertaking is seeking an overall advance in knowledge or capacity in a field of science or technology. You may have various ‘competent professionals’ working on the project – it is vital they are involved in detailing the work completed in the technical report submitted to HMRC.
Include all eligible expenditure
Whether you are claiming tax reliefs, tax credits or enhanced deductions on qualifying expenditure, it is crucial to include all eligible costs e.g. employee salaries, subcontractor or third-party worker fees, consumables, software licenses and cloud computing and data licensing costs. Remember, for accounting periods beginning on or after 1 April 2024, any overseas expenditure on subcontractors or third-party workers is no longer eligible.
Speak to an R&D specialist
Managing the complexities of an R&D Tax Relief claim can be difficult, especially with the recent changes. Working with experts who specialise in R&D tax can improve the success of your claim and minimise the risk of penalties.
Don’t miss submission deadlines
Ensure you are aware of all submission deadlines, as missing one can result in the loss of reliefs. Typically, claimants can submit an R&D claim within 2 years from the end of your accounting period, however, new claimants, or those who haven’t claimed in the last three years must pre-notify HMRC within 6 months of their accounting period’s end. On top of this, the mandatory submission of the Additional Information Form (AIF), which requires technical narrative on the R&D projects and allocation of costs per project, has now come into play. This must be submitted before the corporation tax return on which the claim is formally made. We would recommend a sufficient reminder system which allows adequate time for the preparation and review process – avoiding a last-minute rush.
Prepare a strong technical narrative
Well-structured technical narrative is crucial for a successful claim and relies heavily on input from the ‘competent professional’ discussed in point 4. Ensure you identify the technological baseline against which the advancement is measured, and clearly explain the challenges and efforts made to address them in your R&D project. You will also need to describe how these activities meet the eligibility criteria and demonstrate the contribution to advancing knowledge or capability in your field of science or technology.
Maintain detailed records for future claims
Keep comprehensive documentation, even after your claim has been processed. HMRC can enquire into any claim within 12 months of submission, therefore a systematic record-keeping process would be beneficial to maximise future R&D tax relief claims.
Get in touch
A successful R&D Tax Relief claim provides valuable financial support, rewarding your company’s innovation. By following these ten tips, you can confidently navigate the claim process and boost your chances of achieving a positive result.
If you need support at any stage of the R&D tax relief claim process, our team of specialists would be more than happy to assist you and ensure you are maximising any available reliefs.
Get in touch with corporate tax director, Claire Astley, by clicking the button below.
