How to make a R&D tax claim is frequently the first question that many companies ask when they find out about the scheme for the first time. In theory, the answer is very simple. All a company needs to do is to fill in the appropriate boxes on their CT600 Corporation Tax Return for the relevant amount.
Companies that utilise their accountants will often be asked to tell them how much R&D they have and then the accountant will put down whatever number they are given in the tax return. However, calculation of that number, ensuring it contains the costs of all eligible activities and costs with no ineligible activities is challenging.
And companies doing just this, without including the supporting material for the claim, are likely to face an HMRC enquiry extremely rapidly. R&D Tax Relief Claims are dealt with by inspectors at a number of R&D specialist units around the country. These specialist inspectors take a consistent approach as to what is expected when they receive a claim and deal with all claims other than for Large & Complex Businesses (although they are frequently engaged as internal HMRC consultants on these claims as well).
If as a result of an enquiry, HMRC discover other areas within the company where they believe mistakes have been made, the enquiry can expand into other areas. Under the new HMRC penalty regime, an overclaim as a result of a careless mistake can incur a 33% penalty of the amount overclaimed.
When a claim is submitted, HMRC expects to see supporting documentation showing at a minimum:
It goes without saying that to make a claim, HMRC expect the company to go through a process to accurately determine the amount of qualifying R&D that they have by mapping the activities carried out onto the requirements of the legislation. We have a robust and repeatable technology-driven process that has proven itself over years of successful claims for our clients.
We minimise the likelihood of an enquiry by ensuring that HMRC have all the answers to their questions at the time the claim is submitted.
The average time from starting a claim process with us to receiving a payment from HMRC is under 8 weeks.
Part of our process is that we filter out ineligible projects, activities and costs at a very early stage which means you don’t waste time and don’t end up paying anything if it turns out that your work doesn’t qualify. While we work with you to extract all the relevant financial information from qualifying types of expenditure, in parallel we carry out detailed technical interviews with your technology staff to determine both eligibility levels and produce relevant supporting project documentation. We also have developed robust methods to deal with cases where that information is not available. We don’t use boiler-plated submissions for our clients – every claim pack is individually prepared and takes into account the specific eligible work that has been carried out.
It is very rare for a company to have the information already available to support an R&D claim without having to prepare it specially and the end result of our process is a combined technical and financial pack that we send to HMRC that fully details all the R&D work being claimed, designed to show how the projects fit within the scope of the legislation as well as the process carried out.