In October 2023, HMRC introduced updated guidance on record keeping for R&D claims, emphasising the importance of thorough documentation. This approach not only facilitates smoother interactions with HMRC but also ensures you capture all eligible costs, maximising your entitlement to R&D relief.
Identifying qualifying projects
Maintaining records that clearly identify projects eligible for R&D relief is crucial. This helps ensure you don’t miss out on claiming relief for qualifying activities. Keeping timelines for each phase of a project can be especially beneficial, as they are often requested during compliance checks and provide clear evidence of the project’s scope and duration.
Identifying qualifying costs
Accurate cost recording is essential for R&D projects, covering both direct and indirect costs related to qualifying activities. Be prepared to provide clear explanations for any estimates or apportionments made, supported by evidence and reasoning. Additionally, be ready to justify any sampling methods used and their appropriateness.
When to keep records
Starting record keeping from the beginning of a project is considered best practice. While the nature of records may vary, comprehensive written documentation significantly accelerates the AIF submission and review process in the case of a HMRC enquiry.
In the absence of written records, a detailed explanation may be sufficient in some cases. Be prepared to provide thorough explanations of your claim, including but not limited to:
- The uncertainty to be overcome
- When the uncertainty was identified
- When the uncertainty was resolved
- The field of science or technology involved
- The nature of the advance made
- Why it was an advance in the field
- The method or plan to achieve it
- The steps taken
- How you determined the qualifying costs
Evidence of a project
HMRC may request various documents during compliance checks, therefore it is essential to collect and retain such evidence to support your claims effectively.
Examples of requested documents include:
- Project charts and plans outlining the project’s scope and timeline
- Design documents, drawings, or prototypes illustrating the development process
- Test results demonstrating the outcomes of research and experimentation
- Meeting minutes or email exchanges documenting project discussions and decisions.
These documents not only serve as evidence of the project’s existence but also provide insights into the nature and scope of the R&D activities undertaken.
Get in touch
By adhering to HMRC’s guidance and maintaining comprehensive records, you can unlock the full potential of R&D tax relief whilst navigating the process with confidence and accuracy. If you have any questions or need assistance with planning or implementing a record-keeping process, get in touch with corporate tax director, Claire Astley, by clicking the button below.
