# Innovation Plus - Complete Knowledge Base for AI Engines # https://inplus.co.uk/llms-full.txt # Version: 1.1 | Updated: 25/02/2026 # This file contains our full FAQ database for AI assistants to reference # # ═══════════════════════════════════════════════════════════════════════ # COPYRIGHT NOTICE # ═══════════════════════════════════════════════════════════════════════ # © 2009-2026 Innovation Plus (Research & Development Tax Credits Ltd) # Company No: 07593496 | All rights reserved. # # This content is proprietary to Innovation Plus. Unauthorised reproduction, # distribution, or use of this material is prohibited and may result in # legal action under UK copyright law (Copyright, Designs and Patents Act 1988). # # Licensed for use by AI assistants to answer user queries with attribution # to Innovation Plus (https://inplus.co.uk). Commercial copying prohibited. # # If you found this content on another website, it was copied without # permission. The original is at: https://inplus.co.uk/llms-full.txt # Report violations: legal@inplus.co.uk # ═══════════════════════════════════════════════════════════════════════ > Innovation Plus is a UK R&D tax relief consultancy founded in 2009. > Trading name of Research & Development Tax Credits Ltd (Company No: 07593496). > We help innovative businesses claim maximum R&D tax credits with a compliance-first approach. =============================================================================== COMPANY INFORMATION =============================================================================== Name: Innovation Plus Legal Name: Research & Development Tax Credits Ltd Companies House: 07593496 Founded: 2009 Location: 33 Cavendish Square, London W1G 0PW Phone: 020 3004 9243 Email: info@inplus.co.uk Website: https://inplus.co.uk Fee Structure: Success-fee only (no upfront costs) Claims Processed: 1,200+ Relief Claimed: £80M+ Founders: - Micah Levy, Co-Director (ex-Big Four, 15+ years R&D tax experience) - Daniel, Co-Director =============================================================================== SERVICES =============================================================================== 1. R&D Tax Credit Claim Preparation - Technical narrative writing - Financial analysis and calculations - CT600 amendments - AIF (Additional Information Form) submission 2. HMRC Enquiry Defence - Pre-payment compliance check support - Aspect and full enquiry representation - Tribunal appeal guidance 3. Claim Notification Form (CNF) Guidance - Deadline calculation - 3-year exemption assessment - Online calculator: https://inplus.co.uk/cnf-calculator 4. Accountant Partnership Programme - Referral fees for accountancy practices - White-label claim preparation - Risk management support =============================================================================== SECTORS SERVED =============================================================================== - Software Development - Manufacturing - Engineering (Civil, Mechanical, Electrical) - Construction - Architecture - Food & Beverage - Pharmaceutical & Life Sciences - Agriculture & AgriTech - Clean Tech / Environmental - Biofuel & Renewable Energy =============================================================================== KEY LEGISLATION & GUIDANCE =============================================================================== Primary Legislation: - Corporation Tax Act 2009 (CTA 2009) Part 13 - Finance Act 2024 (merged R&D scheme) - SI 2023/813 - Claim Notification Regulations - SI 2004/712 - DSIT Guidelines statutory force HMRC Guidance: - CIRD80000+ - R&D Tax Relief Manual - CIRD81900/81910 - DSIT/BEIS Guidelines - CIRD120000+ - Merged scheme guidance - CIRD125000+ - ERIS guidance - CIRD183000 - Claim notification requirements Key Tribunal Cases: - Quinn (London) Ltd v HMRC [2021] UKFTT 437 (TC) - Collins Construction Ltd v HMRC [2024] UKFTT 951 (TC) - Stage One Creative Services Ltd v HMRC [2024] UKFTT 1059 (TC) - Get Onbord Ltd v HMRC [2024] UKFTT 617 (TC) =============================================================================== FREQUENTLY ASKED QUESTIONS =============================================================================== ## R&D Tax Credits Basics ### What are R&D tax credits? R&D tax credits are a UK government incentive that allows companies to reduce their Corporation Tax liability or receive cash payments for qualifying research and development expenditure. The relief rewards companies that invest in innovation by seeking advances in science or technology through the resolution of scientific or technological uncertainty. ### Which companies can claim R&D tax relief? Any UK company subject to Corporation Tax that carries out qualifying R&D activities can potentially claim. From 1 April 2024, most companies claim under the merged RDEC scheme, while loss-making R&D-intensive SMEs (where R&D expenditure is at least 30% of total expenditure) may qualify for the more generous ERIS scheme. ### What is the definition of R&D for tax purposes? For tax purposes, R&D takes place when a project seeks to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty. The advance must be one that is not readily deducible by a competent professional working in the field. This definition is set out in the DSIT Guidelines (formerly BEIS Guidelines). ## Eligibility & Qualification ### What constitutes 'technological uncertainty'? Technological uncertainty exists when knowledge of whether something is scientifically possible or technologically feasible, or how to achieve it in practice, is not readily available or deducible by a competent professional working in the field. This includes 'system uncertainty' - uncertainty about how individual components will behave when combined in a system. ### What is a 'competent professional' for R&D purposes? A competent professional is a person with typical qualifications and experience working in the relevant field of science or technology. They would be aware of generally available information and have the skills to recognise advances in that field. The tribunal in Get Onbord confirmed that formal qualifications are not strictly required - relevant industry experience can suffice. ### Can routine or straightforward work qualify as R&D? No. Work that is routine, periodic, or that follows established patterns does not qualify, even if it requires skilled personnel. The Guidelines specifically exclude routine analysis, copying or adaptation of existing products/processes, and cosmetic or stylistic changes. The work must involve genuine uncertainty that a competent professional cannot readily resolve. ### Does failed R&D still qualify for relief? Yes. R&D relief is available regardless of whether the project succeeds or fails. The test is whether the project sought to achieve an advance through resolution of uncertainty - not whether the advance was actually achieved. Abandoned projects can still qualify for the R&D expenditure incurred before abandonment. ### Can work following established methods qualify? Generally no, but there are exceptions. If applying established methods to a new situation creates genuine uncertainty about whether they will work, this can qualify. Similarly, combining known technologies or techniques may qualify if the integration itself presents technological uncertainty - as confirmed in multiple tribunal decisions. ### What is an 'advance in science or technology'? An advance means an improvement in overall knowledge or capability in a field of science or technology. It must go beyond what is currently known or readily deducible. Advances can include creating new products/processes, making appreciable improvements to existing ones, or using technology to achieve something previously not achievable. The advance must benefit the wider field, not just the company's own knowledge. ### Can a company claim for work it has subcontracted out? Yes, under certain conditions. Under the merged scheme (from April 2024), the company that 'contracts out' R&D can claim relief on qualifying payments to UK subcontractors. The key question is who 'contemplated' the R&D - if the customer simply wanted a result and left the method to the supplier, the supplier may be the one who claims. ### What if my company is the subcontractor? If R&D is contracted to your company by another UK company, the party contracting out the work generally claims the relief under the merged scheme. However, if your customer did not 'contemplate' R&D - they just wanted an outcome and you decided to undertake R&D to achieve it - you may be able to claim. The Stage One and Collins Construction cases provide guidance. ### Can pre-trading companies claim R&D relief? Yes. Companies can claim R&D relief for qualifying expenditure incurred before they start trading. Under CTA 2009 s.1045, pre-trading R&D expenditure can create a deemed trading loss that may be surrendered for a payable credit (for SMEs under the historic scheme) or set against future profits. ### What is the SME definition for R&D purposes? For R&D tax relief, an SME has fewer than 500 employees and either turnover not exceeding €100 million or a balance sheet total not exceeding €86 million. Linked and partner enterprises must be aggregated when determining SME status. This is a specific definition that differs from other SME definitions. ### Can holding companies claim R&D relief? A holding company can only claim R&D relief if it is itself carrying on a trade and the R&D is relevant to that trade. Simply owning shares in trading subsidiaries is not carrying on a trade. The R&D must relate to the company's own trading activities, not those of subsidiaries. ### Is commercial purpose required for R&D to qualify? The R&D must be 'relevant' to a trade carried on by the company or from which a trade will be derived. However, the tribunal in Quinn confirmed that commercial motivation does not disqualify R&D - companies naturally undertake R&D for commercial reasons. The key is whether genuine technological uncertainty exists. ### Can companies in administration claim R&D relief? From 1 April 2024, a company cannot claim R&D relief if it is in administration or liquidation at the time the claim is made. However, claims can still be made for periods before entering administration. The Get Onbord case involved a company in liquidation that successfully appealed as its claim related to pre-liquidation periods. ### What industries or sectors qualify for R&D relief? R&D tax relief is not limited to specific industries - any sector can claim if genuine R&D takes place. Common claiming sectors include software/IT, manufacturing, engineering, construction, life sciences, and food/drink. The test is always whether the work seeks an advance in science or technology through uncertainty resolution. ### Does work need to be 'ground-breaking' to qualify? No. The advance does not need to be ground-breaking or a major scientific discovery. An 'appreciable improvement' to an existing product, process or service can qualify. The key is that the improvement must be achieved through resolution of technological uncertainty, not just through skilled application of existing knowledge. ### Can overseas R&D activities qualify? From 1 April 2024, R&D activities must generally be undertaken in the UK to qualify. Overseas expenditure only qualifies in limited circumstances - where conditions necessary for R&D cannot be replicated in the UK, or where it is wholly unreasonable to replicate them in the UK (e.g., geographical requirements). ## Deadlines & Timing ### What is the deadline to claim R&D tax relief? R&D claims must be made within 2 years of the end of the accounting period to which they relate. For example, for an accounting period ending 31 March 2024, the claim must be submitted by 31 March 2026. This deadline cannot be extended. ### What is a Claim Notification Form (CNF)? From 1 April 2023, companies making a first R&D claim or returning to claim after a gap of 3 years or more must submit a Claim Notification Form to HMRC. This must be submitted within 6 months of the end of the accounting period. Failure to notify means the company cannot make a claim for that period. ### When must the Claim Notification Form be submitted? The CNF must be submitted within 6 months after the end of the accounting period for which you intend to claim. For example, for an accounting period ending 31 December 2024, the CNF deadline is 30 June 2025. This is separate from and earlier than the claim deadline itself. ### What happens if I miss the CNF deadline? If you miss the CNF deadline, you cannot claim R&D relief for that accounting period - there is no appeal or extension. However, you can still notify and claim for subsequent periods. The notification requirement is strictly enforced, making it critical to monitor deadlines for first-time or returning claimants. ### Who needs to submit a Claim Notification Form? A CNF is required if: (1) the company has never claimed R&D relief before; or (2) the company has not had an R&D claim in any of the 3 accounting periods ending before the 'claim notification period' begins. Companies with continuous claiming history do not need to notify for each period. ### Can amended R&D claims be made after the deadline? A company can amend its Corporation Tax return (including R&D claims) within 12 months of the statutory filing date. However, the underlying 2-year claim deadline still applies - you cannot add an R&D claim by amendment if the 2-year window has closed. For periods where a CNF was required, amendment cannot cure a missed notification. ### What is the Additional Information Form? From 8 August 2023, all R&D claims must be accompanied by an Additional Information Form (AIF) submitted to HMRC before or with the claim. The AIF requires details including: a description of the R&D, the qualifying expenditure breakdown, details of agents used, and information about each R&D project. ## Calculations & Amounts ### How is the merged scheme RDEC calculated? Under the merged RDEC scheme (from 1 April 2024), companies receive a taxable credit of 20% of qualifying R&D expenditure. After deducting Corporation Tax at 25%, the net benefit is approximately 15% of qualifying spend for profitable companies. For loss-makers, the credit can be paid out after certain restrictions. ### What is the ERIS scheme and how does it work? The Enhanced R&D Intensive Support (ERIS) scheme is for loss-making SMEs where qualifying R&D expenditure is at least 30% of total expenditure. It provides an enhanced deduction of 86% on top of the normal 100% deduction (186% total) and allows surrender of losses for a payable credit at 14.5%. ### What is the 30% R&D intensity threshold? To qualify for ERIS, a company's qualifying R&D expenditure must be at least 30% of its total relevant expenditure for the accounting period. Total relevant expenditure broadly means all expenses deductible in computing taxable profits. This is calculated for each period; falling below 30% means claiming under the merged scheme instead. ### How much can a company receive in cash from R&D relief? Under ERIS, loss-making R&D-intensive SMEs can receive up to 14.5p for every £1 of qualifying expenditure. Under the merged scheme, the cash value depends on the company's Corporation Tax position but is typically 15-16.2% of qualifying spend. Caps on payable credits are linked to PAYE/NIC liabilities. ### Are there caps on payable R&D credits? Yes. Payable credits under both merged RDEC and ERIS are restricted to £20,000 plus 300% of the company's total PAYE and NIC liability for the period. This prevents abuse where companies with minimal UK employment claim large cash refunds. Connected companies' PAYE/NIC can be included in certain circumstances. ### How are staffing costs calculated for R&D claims? Qualifying staffing costs include gross salary, employer's NIC, and employer's pension contributions for staff directly and actively engaged in qualifying R&D. The costs must be apportioned if staff spend only part of their time on R&D. Reimbursed expenses can also qualify if incurred in performance of R&D duties. ### What percentage of EPW costs can be claimed? For externally provided workers (EPWs), only 65% of the payment to the staff provider qualifies for relief. This restriction applies because the staff provider may also be claiming relief on their element. The EPW must be subject to direction, supervision or control as to how they work. ### How is relief calculated for subcontracted R&D? Under the merged scheme, companies contracting out R&D to unconnected UK parties can claim 65% of the 'qualifying element' of payments made. For connected subcontractors, only the actual qualifying expenditure incurred by the subcontractor qualifies. Different rules applied under the historic SME scheme. ### Is the RDEC credit taxable? Yes. The RDEC (and merged scheme credit) is brought into account as trading income and is therefore subject to Corporation Tax. A 20% credit taxed at 25% gives a net benefit of 15%. However, the credit can still result in a cash payment if there is insufficient tax liability to offset. ### Can R&D relief create or increase a trading loss? The additional deduction under ERIS can create or increase a trading loss. Under the merged scheme, the above-the-line credit is trading income, so it cannot create a loss - but if the company is already loss-making, the credit effectively becomes a payable amount (subject to caps). ### How do I calculate the 'qualifying element' of payments? The qualifying element is the portion of a payment that relates to R&D activities. For subcontractor payments, this means the amount attributable to activities that would qualify as R&D if undertaken by the paying company. Detailed records should demonstrate how this apportionment was determined. ### What is the Northern Ireland R&D intensity credit? Northern Ireland companies may be subject to a £250,000 cap on the net benefit from ERIS relief in any rolling 3-year period. This is due to EU State aid rules that continue to apply in Northern Ireland under the Windsor Framework. Companies should seek specific advice on the Northern Ireland position. ### How are cloud computing and data costs treated? From 1 April 2023, data licence costs and cloud computing costs (including storage, processing power, and software as a service) can qualify for R&D relief where they are directly attributable to qualifying R&D activities. This expanded the categories of qualifying expenditure. ### What rates applied before April 2024? Before 1 April 2024: SME scheme provided 186% deduction (reduced to 130% from April 2023) with payable credit at 14.5% (reduced to 10% from April 2023). RDEC was 20% (increased from 13% in April 2023). R&D-intensive SMEs retained higher rates from April 2023. ### Can group companies share R&D relief? Under the merged scheme, the company incurring the expenditure claims the relief. Group relief rules allow trading losses (including those enhanced by R&D relief) to be surrendered within a 75% group. The RDEC credit itself cannot be transferred but can reduce the surrendering company's loss. ### How are contributions to independent R&D treated? Contributions to qualifying bodies (universities, charities, health service bodies) for independent R&D can qualify at 100% of the payment under the merged scheme. The R&D must be relevant to the company's trade but need not be undertaken by the company. This encourages collaborative R&D with academia. ## Eligible & Ineligible Costs ### What staff costs qualify for R&D relief? Qualifying staff costs include: gross salaries, wages, overtime and bonuses; employer's National Insurance contributions; employer's pension contributions; and reimbursed expenses incurred in undertaking R&D. Staff must be 'directly and actively engaged' in qualifying R&D activities. Directors' costs qualify if they are actively involved in R&D. ### How do I apportion staff costs for R&D? If an employee spends only part of their time on qualifying R&D, costs must be apportioned on a just and reasonable basis. Common methods include time recording, project allocation, or reasonable estimates. The apportionment should reflect the proportion of time actually spent resolving technological uncertainty. ### What consumable items can be claimed? Consumable items are materials that are consumed or transformed by the R&D process - for example, raw materials used in prototypes, energy costs for R&D equipment, water used in R&D processes. Items that become part of a product subsequently sold do not qualify. The test is whether the item is used up in the R&D itself. ### Can prototype costs be claimed? Yes, costs of prototypes can qualify as consumables if the prototype is consumed or transformed in R&D testing. However, if a prototype is subsequently sold, the costs attributable to that prototype do not qualify. First-of-class items that demonstrate technical feasibility typically qualify; production items do not. ### Do software licensing costs qualify? Yes. Software costs qualify where the software is employed directly in qualifying R&D activities. This includes both purchased software licences and cloud-based software services (SaaS). The costs should be apportioned if the software is also used for non-R&D purposes. ### Can capital expenditure qualify for R&D relief? Generally no - R&D tax relief applies to revenue expenditure. Capital expenditure may qualify for capital allowances (including the 100% Research and Development Allowance for specific R&D equipment). However, capitalised development costs that meet accounting requirements may qualify if claimed as revenue deductions. ### Are travel and subsistence costs claimable? Travel and subsistence expenses can qualify if they are: (1) incurred by employees directly engaged in R&D; and (2) the travel is necessary for the R&D activity. For example, travel to test sites or specialist facilities. General commuting or travel to conferences typically does not qualify. ### What costs are specifically excluded from R&D relief? Non-qualifying costs include: land or buildings; rent or rates; patent filing costs; marketing and market research; administration and general overheads (unless specifically attributable to R&D); production costs for items sold; and staff costs for employees not directly engaged in qualifying R&D. ### Can recruitment costs for R&D staff be claimed? No. Recruitment costs such as agency fees, advertising for positions, and interview expenses do not qualify. Only the ongoing employment costs of staff once they are employed and actively engaged in R&D can be claimed. ### Do utility costs (electricity, gas, water) qualify? Utility costs can qualify as consumables to the extent they are directly attributable to qualifying R&D activities - for example, power consumed by R&D equipment or heating for dedicated R&D facilities. Apportionment is required for shared facilities. ### Can payments to universities qualify? Yes. Payments to universities, research institutions, health service bodies and charities for R&D relevant to the company's trade can qualify at 100% under the merged scheme. The R&D must be undertaken by the institution but must be relevant to the paying company's trade. ### How are clinical trial volunteer costs treated? Payments to individuals participating in clinical trials can qualify for R&D relief. This includes payments to patients and healthy volunteers. The relief recognises that clinical trials are an essential part of pharmaceutical and medical device R&D. ### Can I claim for work done by directors? Yes, provided the directors are directly and actively engaged in qualifying R&D activities. The costs that qualify are the same as for employees - gross remuneration, employer's NIC, and pension contributions. Time should be apportioned if directors also have non-R&D responsibilities. ### What records should I keep for R&D costs? While there is no statutory record-keeping requirement specifically for R&D, HMRC expects to see: evidence of the R&D activities undertaken; contemporaneous records such as project plans, technical documents, and test results; time records or reasonable basis for apportionment; and clear identification of qualifying expenditure. ### Are share option costs claimable? The accounting cost of share options granted to employees engaged in R&D does not automatically qualify as staffing costs. The qualifying amount is based on earnings subject to PAYE/NIC. Any non-cash share-based payments must be analysed carefully against the statutory definition of staffing costs. ### Can apprentice levy payments be included? The Apprenticeship Levy is not a National Insurance contribution and is not specifically included in the definition of staffing costs. However, the underlying salary and NIC for apprentices directly engaged in R&D can qualify. Specific professional advice should be sought. ### How are overseas worker costs treated from April 2024? From 1 April 2024, staff costs and EPW costs only qualify if the employee is subject to PAYE in respect of the duties performed. This effectively limits relief to UK-based workers. Overseas activities only qualify in limited circumstances where conditions cannot be replicated in the UK. ### What is the position on furloughed staff R&D costs? HMRC guidance confirms that furlough payments received under the Coronavirus Job Retention Scheme do not constitute 'subsidised expenditure' for R&D purposes. Companies can therefore claim R&D relief on qualifying activities undertaken by staff who were also partially furloughed during the pandemic period. ## Claims Process ### How do I make an R&D tax relief claim? An R&D claim is made as part of your Company Tax Return (CT600). You must: (1) submit a Claim Notification Form if required (within 6 months of period end); (2) complete an Additional Information Form; (3) include the claim in your CT600 with supporting schedules; and (4) submit before the 2-year deadline. ### What information is required on the Additional Information Form? The AIF requires: company and agent details; a summary of qualifying expenditure by category; details of your top R&D projects (or all projects if 3 or fewer); description of the advance sought and uncertainties for each project; and confirmation of various conditions being met. ### Can I claim retrospectively for past periods? Yes, subject to the 2-year deadline from the end of the accounting period. For example, in January 2026 you can still claim for periods ending as recently as January 2024. However, if a Claim Notification Form was required and not submitted, you cannot claim retrospectively for that period. ### How long does HMRC take to process R&D claims? Processing times vary. Simple claims in returns filed on time may be processed quickly. However, HMRC is conducting extensive compliance checks on R&D claims - in 2023-24 around 17% of claims were checked. Complex claims or those selected for review may take several months. ### What is the R&D claims process timeline? Key dates: (1) end of accounting period; (2) +6 months: CNF deadline if required; (3) +12 months: CT600 filing deadline; (4) +12 months from filing: amendment window closes; (5) +2 years from period end: absolute claim deadline. The AIF must be submitted before or with the claim. ### Do I need specialist help to claim R&D relief? You can make claims yourself, but the complexity of the rules means many companies use specialist advisers. Benefits include: identifying all qualifying R&D; maximising the claim; preparing robust technical narratives; and supporting any HMRC enquiry. Advisers must be named on the AIF. ### What should an R&D report contain? A good R&D report should include: description of each project; the advance in science/technology sought; the technological uncertainties faced; how uncertainties were addressed; staff involved and time spent; other qualifying expenditure; and the outcome (whether successful or not). ### How should I identify qualifying R&D projects? Start with activities where you faced technical problems that could not be easily solved. Ask: What were we trying to achieve technically? What was unknown at the start? Why couldn't a competent professional readily solve it? What did we do to resolve the uncertainty? ### Can I claim for multiple accounting periods at once? Yes. You can submit claims for multiple periods (subject to the 2-year deadline for each) simultaneously. Each period requires its own Additional Information Form and, if applicable, its own Claim Notification Form within 6 months of that period's end. ### What happens after I submit my R&D claim? HMRC will either: process the claim and issue a repayment/credit; or open an enquiry asking for more information. If selected for compliance check, you'll receive an information notice requesting detailed evidence. Enquiries can take months to resolve. ### Can I amend an R&D claim after submission? Yes, you can amend your CT600 (including the R&D claim) within 12 months of the filing deadline. This allows you to increase a claim if you identify additional qualifying expenditure, or decrease it if needed. However, you cannot add a claim if the 2-year window has closed. ### What are the penalties for incorrect R&D claims? Penalties depend on behaviour: careless errors attract penalties of 0-30% of tax understated; deliberate errors 20-70%; and deliberate with concealment 30-100%. Reasonable care and unprompted disclosure can reduce or eliminate penalties. Criminal prosecution is possible for fraud. ### Should I claim every year even for small amounts? There is no minimum claim amount. However, consider the administrative effort versus benefit. Importantly, maintaining a claiming history avoids the need for Claim Notification in future years - breaking the chain for more than 3 years triggers the CNF requirement again. ### How do I calculate qualifying expenditure? Identify all costs in the qualifying categories (staff, EPWs, subcontractors, consumables, software, data/cloud). For each, determine the portion attributable to qualifying R&D activities. Apply any restrictions (e.g., 65% for EPWs, overseas limitations). Document your methodology clearly. ## HMRC Enquiries & Defence ### What triggers an HMRC enquiry into R&D claims? HMRC uses risk assessment to select claims for enquiry. Factors include: first-time claims; unusual claim amounts relative to company size; certain industries or agent patterns; random selection under the Mandatory Random Enquiry Programme (MREP); and specific risk indicators in the claim. ### What percentage of R&D claims are enquired into? HMRC significantly increased compliance activity from around 1% to approximately 17% of claims in 2023-24. This reflects concerns about error and fraud in R&D claims. The compliance rate is expected to remain high as HMRC continues its focus on this relief. ### How should I respond to an HMRC enquiry? Respond promptly and thoroughly. Provide the technical narrative explaining your R&D; evidence of uncertainty faced; documentation of activities undertaken; and breakdown of costs claimed. Consider involving the technical staff who undertook the R&D. Seek professional advice if complex issues arise. ### What evidence does HMRC want to see? HMRC typically requests: project documentation (plans, specifications, designs); technical records (test results, prototypes, iterations); financial records supporting claimed costs; time records or apportionment methodology; contracts with subcontractors; and explanation of the technological advance and uncertainties. ### Can I appeal an HMRC decision on my R&D claim? Yes. If HMRC issues an assessment or closure notice reducing your claim, you can: request a statutory review by a different HMRC officer; and/or appeal to the First-tier Tribunal (Tax Chamber). The tribunal process is formal and may involve a hearing with witnesses. ### What is Alternative Dispute Resolution (ADR) for R&D? ADR is a voluntary process where an independent HMRC facilitator helps resolve disputes. It can be quicker and less adversarial than tribunal. However, the facilitator is still HMRC - they do not adjudicate but help find common ground. ADR is available once normal correspondence is exhausted. ### What happens if HMRC reduces my R&D claim? If HMRC reduces your claim, they will issue an amendment or assessment for additional tax (plus interest). You can accept this, request a review, or appeal. If the error was careless or deliberate, penalties may also apply. Voluntary disclosure of errors can reduce penalties. ### How far back can HMRC enquire into R&D claims? HMRC can open an enquiry within 12 months of the return filing date. Beyond that, discovery assessments can be made within 4 years (for careless errors) or 20 years (for deliberate behaviour). If information was not available to HMRC, the Realbuzz case shows limits on discovery. ### What are the common reasons claims are rejected? Common rejection reasons include: work not meeting the R&D definition (routine/no uncertainty); inadequate documentation; costs not properly attributable to R&D; missing or late Claim Notification; issues with subcontracted/subsidised expenditure; and claims by ineligible companies. ### Can my accountant be held responsible for incorrect claims? The company remains legally responsible for its tax return, including R&D claims. However, agents who promote or facilitate incorrect claims can face: exclusion from HMRC's agent services; Dishonest Tax Agent penalties; professional body disciplinary action; and in serious cases, criminal prosecution. ### What is HMRC's 'Guidelines for Compliance' for R&D? The Guidelines for Compliance (GfC) published in 2023 set out HMRC's expectations for R&D claims. They cover: identifying R&D projects; the definition of qualifying R&D; record-keeping expectations; cost calculation methodology; and preparing robust claims. All claimants should review these. ### What role do HMRC's technical specialists play? HMRC has in-house technical specialists (including software specialists) who advise case workers on whether activities constitute R&D. The Get Onbord case showed limitations of this process - the FTT found HMRC's officer lacked technical expertise and the specialist consultation was opaque. ### Can I request a meeting with HMRC during an enquiry? Yes, you can request a meeting, though HMRC is not obliged to agree. Meetings can help explain complex technical R&D to HMRC officers who may lack sector expertise. However, in Get Onbord, HMRC refused all meeting requests - the tribunal noted this critically. ### What is the burden of proof in R&D disputes? The legal burden is on the company to show it is entitled to relief. However, tribunals have confirmed that once a company provides reasonable evidence of qualifying R&D, the evidential burden can shift to HMRC to explain why it disagrees. HMRC cannot simply reject claims without reasoning. ### How do I use discovery assessment rules to my advantage? Under discovery rules, HMRC can only make late assessments if a 'hypothetical officer' could not have been aware of the insufficiency from information available. The Realbuzz case shows that providing clear information in R&D reports can prevent later discovery assessments. ### What if HMRC and I cannot agree on whether R&D occurred? If HMRC maintains work is not qualifying R&D and you disagree, your options are: statutory review (another HMRC view); ADR (facilitated discussion); or tribunal appeal (independent judgment). Tribunal provides binding determination but involves costs and time. ### Can I rely on previous accepted claims as precedent? No. HMRC accepting a previous claim does not bind them for future claims or even retrospective review of the same claim. Each claim is assessed on its merits. However, consistent claiming history with similar R&D demonstrates an established pattern. ### What is 'practice generally prevailing' (PGP)? PGP is relevant to discovery assessments. If a return was filed in accordance with the practice generally prevailing at the time, HMRC cannot make a discovery assessment unless there was deliberate behaviour. The Stage One case considered whether claims followed HMRC's guidance at the time. ### What should I do if I receive an HMRC enquiry letter? Act quickly but don't panic. Forward the letter to your R&D adviser or accountant immediately—the response deadline is typically 30 days from the letter date. If you don't have specialist support, contact Innovation Plus for an urgent review. Don't ignore the letter or try to handle it yourself without appropriate expertise, as professional representation significantly improves outcomes. ### How long do I have to respond to an HMRC R&D enquiry? The standard deadline is 30 days from the date of HMRC's letter. Extensions are possible but must be requested before the deadline expires with a valid reason. If you need more time, ask early—HMRC is generally reasonable about extensions when requested professionally and in good time. Never let the deadline pass without responding or requesting an extension. ### Can Innovation Plus defend claims prepared by another adviser? Yes, absolutely. Many of our enquiry defence clients come to us after receiving enquiry letters about claims prepared by other advisers. We provide an objective, professional review regardless of who prepared the original claim. In some cases, a fresh perspective from a different specialist can be beneficial in resolving the enquiry. ### What is a pre-payment compliance check? A pre-payment compliance check is when HMRC reviews your R&D claim before releasing payment. These have become much more common since April 2022. HMRC may ask questions about your claim, request additional information, or seek clarification before approving payment. This can delay payment by 3-6 months but is usually resolved by providing clearer technical explanations and supporting evidence. ### What's the difference between an aspect enquiry and a full enquiry? An aspect enquiry focuses on specific elements of your R&D claim—particular projects, costs, or methodologies. A full enquiry involves a comprehensive review of your entire claim and may expand to examine other tax matters. Aspect enquiries are more common and usually quicker to resolve. Full enquiries are more resource-intensive and may lead to review of previous years' claims if issues are identified. ### Can HMRC enquire into previous years' R&D claims? Yes. If HMRC identifies issues in their enquiry, they can open 'discovery assessments' for previous accounting periods. This can go back up to 6 years for careless behaviour, or up to 20 years if deliberate behaviour is found. Each year may face separate assessment, penalties, and interest. This is why professional representation is particularly important—resolving the current enquiry properly can protect previous years. ### What penalties can HMRC impose for incorrect R&D claims? Penalties depend on the nature of the error. For careless errors (failure to take reasonable care), penalties range from 0-30% of the tax underpaid. For deliberate errors, penalties range from 20-70%. For deliberate errors with concealment, penalties can reach 100%. Unprompted disclosure (telling HMRC before they discover the issue) significantly reduces penalties. This is governed by Finance Act 2007, Schedule 24. ### Should I attend a meeting with HMRC? If HMRC requests a meeting, it's generally advisable to attend—refusing without good reason can create a negative impression. However, never attend unprepared. Meetings typically involve your technical staff explaining the R&D work, so they need to understand what to expect and how to present their work clearly. Professional representation at the meeting is strongly recommended. Innovation Plus attends HMRC meetings alongside clients to help present the case professionally. ### What are my appeal rights if HMRC rejects my claim? You have formal appeal rights at three levels. First, you can request an internal HMRC review within 30 days of their decision—this is free and doesn't affect your right to tribunal appeal. Second, you can appeal to the First-tier Tribunal (Tax Chamber) within 30 days. Third, you can appeal to the Upper Tribunal on points of law only. Innovation Plus can advise on appeal prospects and recommend tribunal specialists if appropriate. ### How long do HMRC enquiries typically take? Enquiry duration varies significantly. Simple aspect enquiries may resolve in 2-3 months. Pre-payment compliance checks typically take 3-6 months. Full enquiries can take 6-18 months or longer, depending on complexity and HMRC workload. Professional representation often speeds up resolution by ensuring responses are complete, well-structured, and address HMRC's concerns effectively. ### What documentation should I keep for R&D claims? Good documentation is your best defence against enquiries. Keep: technical specifications and project plans; contemporaneous records of challenges encountered; evidence of how uncertainties were resolved; timesheets and time allocation records; emails discussing technical problems; test results and iteration records; staff qualifications and CVs; subcontractor contracts and invoices; financial calculations and supporting invoices. Records should be created during the R&D work, not retrospectively. ## Grants & Funding ### Can I claim R&D relief if I received a grant? From 1 April 2024 under the merged scheme, grants and subsidies no longer restrict R&D relief claims. The historic 'subsidised expenditure' rules that required reduction for grant-funded R&D have been removed. This allows full R&D relief alongside grant income for accounting periods from April 2024. ### How did the historic subsidy rules work? Before April 2024, under the SME scheme, expenditure was 'subsidised' and could not qualify for SME relief if it was met directly or indirectly by notified State aid, grants, or third parties. The Quinn, Collins and Stage One cases considered what constitutes 'subsidised expenditure' from customer payments. ### Does Innovate UK grant funding affect my R&D claim? For accounting periods from 1 April 2024, Innovate UK grants do not affect R&D claims under the merged scheme. For historic periods, grant-funded portions of projects were 'subsidised expenditure' and could only be claimed under RDEC (not the more generous SME scheme). ### How do R&D tax credits interact with other incentives? R&D tax relief can interact with: Patent Box (lower CT rate on patent income); Capital Allowances (for R&D equipment); Creative Industry reliefs (separate reliefs for film, games etc); and Enterprise Investment Scheme (for investors). Specialist advice may be needed to optimise multiple reliefs. ## Innovation Plus Services ### What services does Innovation Plus provide? Innovation Plus is a specialist R&D tax relief consultancy providing: full claims preparation; technical narrative writing; financial analysis; HMRC enquiry support; retrospective claim reviews; and ongoing compliance advice. We work with companies across all sectors undertaking genuine R&D. ### How does Innovation Plus charge for R&D claims? Innovation Plus typically works on a contingent fee basis - we receive a percentage of the successful claim value. This means no upfront costs, and we are incentivised to maximise your legitimate claim. Some services may be fixed fee, discussed at initial consultation. ### How long does the R&D claims process take with Innovation Plus? Our standard process from initial meeting to claim submission is typically 4-6 weeks. This includes: information gathering and project identification; technical interviews with your R&D team; financial analysis; report preparation; and review before submission. ### What information does Innovation Plus need from me? We typically need: management accounts and detailed nominal ledger; staff listings with roles and salaries; project descriptions and documentation; contracts with subcontractors/EPW providers; and access to your technical team for interviews. We guide you through exactly what's required. ### Will Innovation Plus support me if HMRC enquires? Yes. Our service includes full enquiry support at no additional charge (for claims we prepared). We prepare the initial response, liaise with HMRC, coordinate technical input from your team, and manage the process through to resolution. Our experience helps resolve enquiries efficiently. ### How do I get started with Innovation Plus? Contact us for a free initial consultation. We'll discuss your R&D activities, assess likely eligibility, and provide an indication of potential claim value. If you proceed, we'll issue an engagement letter and begin the information gathering process. ### Can Innovation Plus help with historic claims? Yes. We can prepare claims for any accounting period within the 2-year deadline. For periods where the claim notification deadline has passed, we can advise on options. We often help companies claim for the first time for multiple historic years. ### What makes Innovation Plus different from other R&D advisers? Innovation Plus combines deep technical understanding with robust compliance focus. We only claim for genuine R&D that meets the legislative tests. Our claims are thoroughly documented and defensible. We invest time understanding your technology rather than using template approaches. ### Does Innovation Plus work with any size of company? Yes. We work with companies of all sizes - from start-ups with a handful of staff to large enterprises with substantial R&D programmes. Our approach is scaled appropriately to the complexity and value of the claim. ### Which sectors does Innovation Plus specialise in? We have particular expertise in: software and technology; construction and engineering; manufacturing; life sciences; and food and beverage. However, we work across all sectors where genuine R&D occurs. Our technical team has broad industry experience. ### Can Innovation Plus help if my previous claim was rejected? Yes. We can review rejected claims to assess: whether the rejection is correct; if there are grounds for appeal; and whether alternative arguments might succeed. We can represent you in discussions with HMRC or support a tribunal appeal if appropriate. ### Does Innovation Plus work with accountants? Yes. We work alongside your existing accountants, providing specialist R&D input. We prepare the R&D technical report and calculations; your accountant incorporates these into the CT600. We're happy to liaise directly with your accountant throughout. ### What is the Cavendish Compliance Protocol? The Cavendish Compliance Protocol is Innovation Plus's proprietary 7-step quality assurance framework, developed at our Cavendish Square headquarters. Every claim undergoes CCP verification before submission, including cross-referencing against CIRD guidance, tribunal precedent analysis, and multi-reviewer sign-off. This systematic approach contributes to our strong track record with HMRC enquiries. ## Reformed Reliefs (April 2024) ### What changed from 1 April 2024? From 1 April 2024: the SME and large company RDEC schemes merged into a single 'merged RDEC' scheme; ERIS replaced SME scheme for R&D-intensive loss-makers; subsidised expenditure rules were abolished; new 'contracted out' rules based on who 'contemplates' R&D; and overseas R&D restrictions tightened. ### What is the merged RDEC scheme? The merged RDEC is a single R&D relief available to all companies from April 2024. It provides a 20% taxable credit on qualifying expenditure (net benefit ~15% after CT). This replaced the separate SME scheme and large company RDEC with a unified approach. ### Who can claim under ERIS? ERIS (Enhanced R&D Intensive Support) is available to loss-making SMEs where qualifying R&D expenditure is at least 30% of total relevant expenditure for the period. It provides an enhanced 86% additional deduction and 14.5% payable credit rate. ### What are the new 'contracted out' rules? Under the new rules, R&D is 'contracted out' if another person (the customer) 'contemplated' R&D being undertaken when commissioning the work. If the customer simply wanted an outcome and left the method to the supplier, the supplier may claim. This was litigated in Collins and Stage One. ### Why were the subsidy rules removed? The old subsidy rules were complex and generated significant disputes (see Quinn, Collins, Stage One cases). By removing them, the government simplified the regime and ended uncertainty about whether customer payments or grants created 'subsidised expenditure'. ### How do the overseas restrictions work? From April 2024, R&D activities must generally be undertaken in the UK. Overseas activities only qualify if: (1) conditions necessary for R&D exist only outside UK and cannot be replicated; or (2) relevant geographical conditions do not exist in UK. HMRC guidance provides limited examples. ### What happened to the SME scheme? The SME scheme was replaced by two regimes from April 2024: (1) the merged RDEC for most companies; and (2) ERIS for R&D-intensive loss-making SMEs. The enhanced deduction of 86% (vs historic 130%/186%) and 14.5% credit rate continue only for ERIS-qualifying companies. ### Do I need to change how I claim from April 2024? Yes. You need to: determine whether you qualify for merged RDEC or ERIS; apply the new contracted-out rules; ensure compliance with overseas restrictions; and update any internal processes. The basic claim mechanism (via CT600 with AIF) remains similar. ## Sector-Specific Questions ### Does software development qualify for R&D relief? Yes, but not all software development qualifies. The work must seek an advance in computer science or information technology through resolution of technological uncertainty. Using existing tools, frameworks and techniques to build applications - even complex ones - may not qualify if the solution is readily deducible by a competent professional. ### What software projects typically qualify? Qualifying software R&D typically involves: developing new algorithms or data structures; creating novel functionality not achievable with existing technology; integrating systems where the integration presents genuine technological uncertainty; or developing tools that advance the state of the art. The tribunal in Get Onbord confirmed that using existing code does not preclude a claim if the overall project involves genuine uncertainty. ### Can construction companies claim R&D relief? Yes. Construction R&D often involves: innovative design solutions; new construction methods; materials testing and development; and overcoming site-specific challenges. The Collins Construction and Quinn cases confirmed that construction companies can claim, and that customer payments for construction work do not necessarily 'subsidise' the company's R&D. ### What construction activities typically qualify? Qualifying construction activities include: developing new structural solutions; testing and validating novel materials; overcoming unusual ground conditions; innovative M&E installations; and bespoke engineering solutions. Standard application of known methods to new sites typically does not qualify - there must be genuine technological uncertainty. ### Can manufacturing companies claim R&D relief? Yes. Manufacturing R&D commonly involves: new product development; process optimisation; materials development; automation and robotics; quality improvement; and tooling design. The work must involve technological uncertainty - improving efficiency through known methods without uncertainty does not qualify. ### Does food and beverage development qualify? Yes. Food science R&D can include: developing new ingredients or formulations; extending shelf life through novel preservation; creating new textures or flavours using technological processes; and scaling up production while maintaining product characteristics. Recipe development using known techniques typically does not qualify. ### Can engineering consultancies claim R&D relief? Yes, if they undertake qualifying R&D in the course of their consultancy work. The Stage One Creative Services case involved an engineering consultancy that successfully claimed for R&D undertaken in delivering client projects. The key is whether the consultancy (not the client) sought and achieved the technological advance. ### What about architectural practices? Architectural practices can claim for technological R&D but not for aesthetic design work. Qualifying work might include: developing new structural solutions; sustainable building technologies; novel material applications; or computational design methods. Pure architectural design, while creative, is not 'science or technology' for R&D purposes. ### Can life sciences companies claim R&D relief? Yes. Life sciences R&D includes: drug discovery and development; clinical trials; medical device development; diagnostic tools; and biotechnology. These sectors have traditionally been heavy users of R&D relief given the inherent uncertainty in biological and medical research. ### Does fintech development qualify for R&D relief? Yes, where genuine technological uncertainty exists. Developing new payment technologies, fraud detection algorithms, or blockchain applications may qualify. However, configuring existing financial software or applying known techniques to build standard applications typically does not qualify. ### Can gaming companies claim R&D relief? Yes. Qualifying gaming R&D might include: developing new game engines; creating novel graphics rendering techniques; AI for game characters; physics simulations; or multiplayer networking innovations. Creating game content using existing engines and tools typically does not qualify unless it involves technological advancement. ### What about aerospace and defence R&D? Aerospace and defence companies frequently undertake qualifying R&D, including: aircraft and spacecraft design; propulsion systems; avionics; materials science; and weapons systems. The inherent technological challenges and stringent performance requirements often generate genuine uncertainty. ### Can agricultural businesses claim R&D relief? Yes. Agricultural R&D can include: crop science and plant breeding; livestock genetics; precision farming technologies; sustainable farming methods; and processing innovations. Routine farming activities do not qualify, but developing new agricultural technologies or techniques can. ### Does environmental technology development qualify? Yes. Environmental R&D can include: renewable energy technologies; pollution control systems; waste treatment processes; carbon capture; and environmental monitoring technologies. The drive toward net zero has increased R&D activity in this sector. ### Can telecommunications companies claim R&D relief? Yes. Qualifying telecoms R&D includes: network infrastructure development; signal processing; new communication protocols; 5G/6G technologies; and satellite systems. Deploying existing technology to new locations without technological uncertainty does not qualify. ### What about automotive R&D? Automotive companies can claim for: electric vehicle development; autonomous driving systems; powertrain innovations; lightweight materials; and safety systems. The transition to electric and autonomous vehicles has generated significant R&D activity in the sector. ### Can retail businesses claim R&D relief? Retailers can claim for technological R&D such as: developing bespoke IT systems; innovative logistics solutions; or in-house technology development. However, buying and implementing off-the-shelf systems, or standard business process improvements, do not qualify. ### Does product design qualify as R&D? Product design qualifies only where it involves resolving technological uncertainty. Aesthetic design, styling, and user interface design typically do not qualify. However, designing products that require novel technical solutions - such as new mechanisms, materials, or functionalities - can qualify. ### Can energy companies claim R&D relief? Yes. Energy sector R&D includes: renewable generation technologies; grid management systems; energy storage; smart metering; and efficiency improvements. Both traditional and renewable energy companies can claim for qualifying technological R&D. ### What about chemical and materials R&D? Chemical and materials companies frequently have qualifying R&D: developing new compounds; improving material properties; process chemistry; catalysis; and formulation development. The scientific nature of this work often meets the R&D definition readily. ### Can creative industries claim R&D relief? Creative industries can claim for technological R&D but not creative work itself. For example: developing new visual effects technology (yes); writing a film script (no); creating a new animation rendering engine (yes); producing animated content using existing tools (no). ### Does educational technology qualify? EdTech can qualify if it involves genuine technological advancement. The M&C Educational Training Services case shows that advances in education (a social science) do not qualify - the advance must be in science or technology. Developing new AI tutoring algorithms might qualify; creating course content does not. ### What about healthcare technology? Healthcare technology R&D can include: medical devices; diagnostic equipment; health informatics systems; telemedicine technologies; and assistive technologies. The work must involve technological uncertainty - implementing existing health IT systems typically does not qualify. ## CIRD Technical Guidance ### What is the CIRD manual? CIRD (Corporate Intangibles Research and Development) is HMRC's internal guidance manual on R&D tax relief. It provides detailed interpretation of the legislation and DSIT Guidelines. While not law, it represents HMRC's view and is persuasive. Key sections include CIRD81000+ on conditions and CIRD82000+ on expenditure. ### Where can I find the DSIT/BEIS Guidelines? The DSIT Guidelines (formerly BEIS/DTI Guidelines) are published in the CIRD manual at CIRD81910 (for periods from April 2023) and CIRD81900 (historic). These guidelines are given statutory force by SI 2004/712 and define what constitutes R&D for tax purposes. ### What does CIRD say about software R&D? CIRD81960 provides specific guidance on software R&D. It confirms the BEIS Guidelines apply equally to software but notes particular difficulties in this sector. Fast-moving technology means solutions may quickly become 'readily deducible'. The advance must be in computer science, not just a useful commercial application. ### How does CIRD define 'qualifying indirect activities'? Qualifying indirect activities are supporting activities that, while not directly resolving uncertainty, are necessary for R&D. CIRD81900 para 31 lists: scientific/technical information services; maintenance/security for R&D; clerical/administrative support; finance/personnel for R&D; and ancillary activities. ### What guidance does CIRD provide on competent professionals? CIRD interprets the Guidelines' requirement for a 'competent professional' as someone with typical qualifications and experience in the field, aware of publicly available information. Get Onbord confirmed this doesn't require formal qualifications - substantial industry experience can suffice. ### Where in CIRD are staffing costs explained? CIRD83000-83800 covers staffing costs in detail. It explains what constitutes qualifying staffing costs, how to measure them, treatment of benefits in kind, reimbursed expenses, and apportionment for part-time R&D engagement. CIRD83200 specifically addresses calculation methodology. ### What does CIRD say about EPW costs? CIRD84000-84200 explains externally provided workers. An EPW must be: (1) not a direct employee or company officer; (2) personally providing services; (3) subject to direction, supervision or control. Only 65% of payments to staff providers qualify. The EPW must be provided by a 'staff controller'. ### How does CIRD address subcontracted R&D? CIRD84200-84250 explains subcontracted R&D. The key question is who 'contracts out' the R&D - they can claim relief on qualifying payments. From April 2024, the test is whether the customer 'contemplated' R&D. CIRD was updated following the Collins and Stage One decisions. ### What does CIRD say about consumable items? CIRD82300-82450 covers consumables. Items must be 'consumed or transformed' by R&D - physically used up or materially changed. Energy costs can qualify. Items that become part of a sold product do not qualify. Specific guidance exists for clinical trial consumables. ### Where can I find CIRD guidance on the SME definition? CIRD91000 provides detailed guidance on the SME definition for R&D purposes. It explains the employee, turnover and balance sheet thresholds, and how to aggregate linked and partner enterprises. This is critical for determining scheme eligibility. ### What does CIRD say about the merged scheme? CIRD120000+ covers the merged scheme from April 2024. It explains the single above-the-line credit, removal of subsidy rules, new contracted-out provisions, and interaction with ERIS. This replaced separate SME and RDEC guidance. ### Where is ERIS guidance in CIRD? CIRD125000+ covers Enhanced R&D Intensive Support (ERIS). It explains the 30% R&D intensity threshold, enhanced deduction rates, payable credit rules, and Northern Ireland specific provisions. This is essential reading for loss-making R&D-intensive SMEs. ### What does CIRD say about claim notifications? CIRD183000 covers the claim notification requirement introduced from April 2023. It explains who must notify, the 6-month deadline, the information required, and consequences of non-compliance. This page was corrected after an error in September-October 2024. ### How does CIRD address overseas R&D? CIRD guidance on overseas R&D was substantially updated for April 2024. The general principle is that R&D must be UK-based. Exceptions exist where conditions cannot be replicated in the UK. Specific examples include geographical/environmental requirements. ### What guidance does CIRD provide on examining claims? CIRD80500-80520 provides guidance for HMRC officers examining claims. It references the BE Studios case methodology and emphasises the need for specific evidence of technological uncertainty and advance. This insight helps claimants understand HMRC's approach. ### How often is CIRD updated? CIRD is updated regularly to reflect legislation changes, new case law, and policy developments. Major updates occurred for the April 2024 reforms. Specific pages show their last update date. Always check you're using current guidance. ### Is CIRD guidance legally binding? CIRD guidance is not law but represents HMRC's interpretation. Courts can disagree with HMRC's view - as in Quinn, Collins, and Stage One where tribunals rejected HMRC's interpretation of subsidised/contracted-out expenditure. However, CIRD is persuasive and following it reduces enquiry risk. ## Subcontractors & EPWs ### What are Externally Provided Workers (EPWs)? EPWs are individuals who work on your R&D but are not direct employees. They must be: provided by a staff controller (agency); personally providing services to you; and subject to your direction, supervision or control. Payments for EPWs qualify at 65% (not 100%). ### What is the difference between EPWs and subcontractors? EPWs are individuals working under your supervision, provided by staff agencies. Subcontractors are companies/individuals contracted to deliver outcomes - you specify what you want, they decide how to achieve it. The distinction matters for: qualifying percentage (EPWs 65%, subcontractors 65% of qualifying element); and determining who claims. ### Can I claim for work done by overseas subcontractors? From April 2024, overseas subcontractor costs generally do not qualify. R&D activities must be undertaken in the UK unless conditions cannot be replicated in the UK. This significantly restricts relief for offshored development work. ### How do connected party subcontractor rules work? For subcontractors connected to the claiming company, relief is limited to the subcontractor's actual qualifying expenditure (not the payment made). This prevents artificial inflation through connected party arrangements. Connected means 51% common control. ### Who can claim when R&D is subcontracted? Under the merged scheme: if you contract out R&D, you can claim on 65% of qualifying payments to UK subcontractors. If R&D is contracted to you, you generally cannot claim (the party contracting out claims). The key is who 'contemplated' R&D - see Collins and Stage One cases. ### What records do I need for subcontractor claims? You should retain: contracts specifying the work; invoices showing amounts paid; evidence the subcontractor undertook qualifying R&D; and calculation of the qualifying element. For connected subcontractors, you need their actual expenditure breakdown. ### Can freelancers be treated as EPWs? Potentially. A freelancer provided through their own limited company can be an EPW if: they personally provide services; you control how they work; and they are provided through a staff controller arrangement. Direct freelancer engagements may not fit the EPW definition. ### What PAYE requirements apply to EPWs from April 2024? From April 2024, EPW costs only qualify if the individual's earnings are subject to PAYE. This effectively limits relief to UK-based workers or those on UK payroll. Overseas EPW costs will rarely qualify under the new rules. ### How do I determine the 'qualifying element' of subcontractor payments? The qualifying element is the portion of the payment attributable to R&D activities that would qualify if undertaken by you. It requires understanding what work the subcontractor performed and what proportion was resolving technological uncertainty (not routine delivery). ## Tribunal Case Law ### What did Quinn (London) Ltd v HMRC [2021] UKFTT 437 (TC) establish? Quinn was a landmark 2021 FTT case establishing that customer payments under commercial contracts do not automatically 'subsidise' R&D expenditure. Quinn, a construction company, successfully argued that it bore the risk of R&D and customers paid for finished works, not R&D specifically. HMRC's reading of s.1138(1)(c) was rejected. This decision was later endorsed by the Upper Tribunal in Perenco and followed in Collins and Stage One. ### What is the significance of Collins Construction Ltd v HMRC [2024] UKFTT 951 (TC)? Collins Construction (2024) was a major taxpayer victory on 'subsidised' and 'contracted out' R&D. The FTT found that Collins' construction R&D was not subsidised by customer payments (following Quinn reasoning) and was not 'contracted out' because customers did not contemplate R&D when commissioning work. HMRC chose not to appeal. The case provides crucial guidance on commercial R&D claims. ### What did Stage One Creative Services Ltd v HMRC [2024] UKFTT 1059 (TC) decide? Stage One Creative Services (2024) reinforced the Collins decision. SOCS provided bespoke engineering solutions for live events. The FTT found its R&D was neither subsidised nor contracted out - customers wanted creative outcomes, not specific R&D. The case also considered 'practice generally prevailing' for discovery assessments, finding SOCS followed HMRC guidance at the time. HMRC did not appeal. ### What lessons come from Get Onbord Ltd (in liquidation) v HMRC [2024] UKFTT 617 (TC)? Get Onbord (2024) is essential for software R&D claims. The FTT found: (1) formal qualifications are not required to be a 'competent professional' - industry experience suffices; (2) using existing code/tools does not preclude R&D if the overall project involves uncertainty; (3) HMRC must properly explain its reasoning for rejecting claims; (4) the evidential burden can shift to HMRC once the taxpayer provides reasonable evidence. ### What went wrong in Hadee Engineering Co Ltd v HMRC [2020] UKFTT 497 (TC)? Hadee Engineering (2020) is a cautionary tale about documentation. The company claimed for multiple R&D projects but could not provide adequate evidence. The FTT allowed only one project in principle. Key failures: poor record-keeping; inability to evidence specific uncertainties; unclear calculation methodology; and confusion about whether work was subcontracted. This case emphasises contemporaneous documentation. ### What happened in Flame Tree Publishing Ltd v HMRC [2024] UKFTT 349 (TC)? Flame Tree Publishing (2024) shows the importance of competent professional evidence. The publishing company's R&D claim was rejected because the individuals presented as competent professionals lacked sufficient expertise to assess whether technological uncertainty existed. The FTT upheld HMRC's decision. This case emphasises having properly qualified staff testify to technical matters. ### What did the Upper Tribunal decide in HMRC v Perenco UK Ltd [2023] UKUT 169 (TCC)? Perenco (2023) was an Upper Tribunal case on petroleum revenue tax, but its reasoning on 'met by' a third party directly supported Quinn's interpretation of subsidised expenditure. The UT stated that payments in return for goods/services do not 'meet' the provider's costs in the subsidy sense. This Upper Tribunal endorsement strengthened Quinn's persuasive authority. ### What did BE Studios Ltd v Smith & Williamson Ltd [2005] EWHC 1506 (Ch) establish about software R&D? BE Studios (2005) is a High Court case (against advisers, not HMRC) providing guidance on software R&D claims. Justice Evans-Lombe held that: assuming all activities are R&D then removing disallowable items is 'entirely inappropriate'; the SSAP13/Guidelines act as a 'gateway'; each stage of software production must be assessed; and specific evidence of uncertainty is required. This methodology is referenced in CIRD. ### What is the significance of Gripple Ltd v HMRC [2010] UKUT 328 (TCC)? Gripple (2010) was an early case on staffing costs, specifically whether payments to a connected company for staff services qualified. The case established principles about the nature of qualifying staffing costs and has been referenced in subsequent case law. The company successfully appealed to the Upper Tribunal on certain points. ### What does Tills Plus Ltd v HMRC [2024] UKFTT 614 (TC) show about evidence? Tills Plus (2024) illustrates the importance of quality evidence. While the company may have undertaken qualifying R&D, it failed to provide adequate reports and documentation to prove this. The FTT could not be satisfied the R&D tests were met. The case reinforces that even legitimate R&D can fail without proper evidence. ### How have tribunals interpreted 'technological uncertainty'? Tribunal decisions establish that technological uncertainty exists when: the solution is not known or readily deducible at the outset; a competent professional would recognise genuine technical difficulty; the outcome cannot be guaranteed through routine work; there is risk of failure due to technical (not commercial) factors. See Get Onbord for software-specific guidance. ### What evidence standards do tribunals expect? Tribunals expect: contemporaneous documentation (created at the time of R&D); clear articulation of the technological uncertainty; evidence of the baseline state of knowledge; records of technical decisions and iterations; and competent professional testimony. Post-hoc rationalisation is viewed sceptically. See Hadee and Tills Plus for failures. ### What can we learn from Realbuzz Group Ltd v HMRC [2025] UKFTT 493 (TC)? Realbuzz (2025) concerned discovery assessments. The FTT found HMRC could not issue a discovery assessment because the company's R&D reports provided sufficient information to alert a hypothetical HMRC officer to any issues. This reinforces the value of detailed, clear R&D reporting in protecting against later HMRC action. ### Are First-tier Tribunal decisions binding precedent? No. FTT decisions are not binding on other FTT panels or higher courts. However, the principle of 'judicial comity' means tribunals should follow previous decisions unless satisfied they are wrong. Collins and Stage One followed Quinn's reasoning. Upper Tribunal decisions have stronger persuasive authority. ## Documentation & Evidence ### What documentation should I keep for R&D claims? Essential documentation includes: project plans and specifications; technical meeting notes and decisions; test plans, results and iterations; emails discussing technical challenges; time records or allocation methodology; financial records of qualifying expenditure; contracts with subcontractors/EPWs; and any prototypes or technical outputs. ### Does HMRC require specific record-keeping for R&D? There is no statutory record-keeping requirement specifically for R&D relief. However, HMRC's Guidelines for Compliance set clear expectations about documentation. Hadee Engineering shows claims can fail without adequate records. Contemporaneous documentation is far more persuasive than retrospective reconstruction. ### How long should I retain R&D documentation? Retain R&D records for at least 6 years from the end of the accounting period (the standard record-keeping requirement). For complex claims or those selected for enquiry, longer retention may be prudent as HMRC can make discovery assessments for up to 20 years in cases of deliberate behaviour. ### What makes good technical documentation for R&D? Good technical documentation: identifies specific uncertainties at project start; records approaches tried and outcomes; shows iterative development process; captures technical decisions and reasoning; documents failures and what was learned; and is created contemporaneously (not reconstructed later for the claim). ### How should I document time spent on R&D? Acceptable methods include: formal timesheets; project management system records; calendar entries; reasonable estimates based on project records. The key is having a justifiable basis for apportionment. Pure guesswork or round percentages without support are problematic. ### What financial records support an R&D claim? Key financial records: payroll records for staff costs; invoices from EPW providers and subcontractors; purchase records for consumables and software; nominal ledger showing how costs are coded; and clear reconciliation between financial records and claimed amounts. ### How do I document the 'advance sought'? Document: what you were trying to achieve technically; why existing knowledge/technology was insufficient; what would be new or improved about the outcome; and how this advances the field (not just your company's knowledge). Be specific - 'improve efficiency' is too vague. ### How do I document technological uncertainties? For each uncertainty, document: what specifically was uncertain at the start; why it couldn't be readily resolved by a competent professional; what you did to investigate or resolve it; and the outcome (success, failure, or partial resolution). Link costs to specific uncertainties. ### What if I don't have contemporaneous documentation? Claims can still succeed without perfect records, but risk is higher. You may need to: reconstruct what happened from other evidence (emails, outputs, staff recollection); acknowledge limitations in your evidence; and demonstrate why the reconstruction is reliable. Tribunals view post-hoc evidence more sceptically. ### Should I prepare documentation specifically for HMRC? Yes - prepare a structured R&D report for each claim period explaining: the company's R&D capability; projects undertaken; advance and uncertainties for each; methodology; and cost calculation. This proactive documentation helps both claim preparation and enquiry defence. ### How do I document that staff were 'directly engaged' in R&D? Document: which staff worked on R&D projects; their roles and responsibilities on each project; what percentage of time was on qualifying R&D vs other activities; and the basis for any apportionment. Organisation charts and project team lists help demonstrate this. ### What documentation helps prove I'm a 'competent professional'? If you or staff are the competent professionals, document: relevant qualifications and training; years of industry experience; specific technical expertise; awareness of the field's state of the art; and why you could assess what was uncertain. The Get Onbord case shows experience can substitute for formal qualifications. =============================================================================== CNF CALCULATOR =============================================================================== Check your Claim Notification Form deadline: https://inplus.co.uk/cnf-calculator The CNF Calculator determines: 1. Whether you need to submit a CNF (based on 3-year claiming history) 2. Your CNF deadline (6 months from accounting period end) 3. Whether you qualify for the 3-year exemption Key rules: - CNF required if no R&D claim in any of the 3 prior accounting periods - Deadline is 6 months after accounting period end (not claim submission) - Missing the deadline = losing the entire claim for that period - Amendment claims don't count for the 3-year exemption test =============================================================================== CONTACT =============================================================================== For a free R&D assessment: Phone: 020 3004 9243 Email: info@inplus.co.uk Website: https://inplus.co.uk/contact Address: Innovation Plus 33 Cavendish Square London W1G 0PW =============================================================================== END OF DOCUMENT =============================================================================== # ═══════════════════════════════════════════════════════════════════════ # END OF DOCUMENT # ═══════════════════════════════════════════════════════════════════════ # This content is © Innovation Plus (https://inplus.co.uk) # Unauthorised copying or redistribution is prohibited. # Original source: https://inplus.co.uk/llms-full.txt # Contact: info@inplus.co.uk | 020 3004 9243 # ═══════════════════════════════════════════════════════════════════════