Tips for Making a Successful R&D Tax Credits Claim

by Startacus Admin

Many innovative startups and SMEs are under the impression that claiming for research and development tax credits are too difficult or costly to be worth the rewards. In fact, the average R&D tax claim for London SMEs for example is £81,000, so it’s always worth finding out if you can claim.

EmpowerRD, backed by Forward Partners, has been disrupting the R&D tax credit space since their launch last year. Their combination of technology and expertise is helping users submit R&D claims at a fraction of the price charged by the established advisory community.

Here, Harinder Sandhu, Founder of EmpowerRD and formerly a national lead at PwC for Government Incentives and an adviser on HMRC’s R&D consultative committee, shares 5 key tips for making a successful R&D tax credits claim.

"These (R&D Tax Credits) are a wonderful incentive provided by the UK government to spur innovation in the UK (especially important given the current Brexit-related uncertainty). It means that for activities, and their respective costs, related to research and development you could get back 33p on every £1 of investment. 15,000 SMEs take advantage of it every year but, surprisingly, there are still tens of thousands of businesses that could claim but don’t.

We suspect it’s one of too things: lack of clear guidance on whether they qualify or believing the value may be too restrictive and therefore of limited value to them.

We’ve identified below 5 key tips for making a successful R&D tax credits claim.

Revisit all potentially eligible R&D activities from the past 12 months.

Eligible R&D projects must have “looked for an advance in science and technology” and “had to overcome uncertainty”. Your project doesn’t need to have a successful launch or prove it made advances, you can still claim for the resources and time used testing those advances.

Eligible R&D activities include:

Pure research

Technical analysis

Development work

Testing

Training

Technical production support

Process development

Project management

Your R&D tax claim needs evidence, receipts, and pay slips to support it, and retaining these are already a legal requirement, so it’s likely you have most of the material you need to support your claim.

Choose the right projects to claim for.

The best projects to showcase are those that aim to overcome a significant obstacle in your industry – the bigger the project the better, because you can maximise your claim. ‘Science and technology’ can mean a huge range of sectors and disciplines, so there’s a lot of flexibility.

If you’re unsure whether one of your projects would meet the criteria, it’s smart to get some initial advice from EmpowerRD. Calling HMRC won’t give you a clear-cut answer; they’re not qualified to make those kinds of judgements over the phone. EmpowerRD have a 100% claim success rate, in part because we only submit projects that tick all the qualification boxes.

Track time spent on R&D activities now and going forward.

To make claiming easier both now and next year, track all the time and activity that goes into your R&D projects. Staff costs are usually the highest contributors to the claim, but if a staff member’s time is spread out over various projects, an estimated percentage of their salary will be necessary.

A detailed record system, updated continuously throughout the R&D period, will enhance your claims credibility. Various tracking software is available, but your R&D tax specialist can advise you on how to track activity in an efficient and cost-effective way.

Consider how grants might affect your claim.

Receiving grants in the past can sometimes make claiming more complex. If your business received notifiable State Aid, you can’t claim for R&D tax credits on top of that. Other forms of State Aid are acceptable, including de minimis and funding from schemes like Horizon 2020.

This is an area that many startups and SMEs are unsure about, but they certainly shouldn’t be expected to be instant experts. Before you rule out a claim, find out if the State Aid you’ve been granted is notifiable or not by asking an EmpowerRD expert.

Cut down the amount of time it takes to make and file your claim.

EmpowerRD provide an end-to-end service supported by expert advisors.

It also makes the process far more efficient than the traditional tax consultancies. Once you’ve entered your details into our platform, we process your claim within a day. In contrast, most traditional tax advisors will need 4 weeks. It is a long wait when you consider that you then need to wait further 3-4 weeks for HMRC to process your claim."

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Published on: 24th April 2018