While a compliant R&D tax credit claim should be the norm, recent years have seen an uptick in error and fraud. In response, HMRC has enacted a series of reforms. Some of these are already in effect, with more expected in 2023.
In light of this, it’s more crucial than ever to ensure you build a high-quality R&D tax credit claim. By shunning best practices, you open yourself up to a potential enquiry from HMRC, which could potentially delay your funds for several months.
Here are 5 top tips to ensure your R&D tax credit claim is as robust and optimised as possible.
1. Record your challenges as you go
Rather than trying to remember everything at the end of your financial year, keep a record of the challenges you came across throughout the year. This doesn’t need to be every week. Each quarter should be fine. Just put a reminder in your diary!
If you partner with an R&D specialist, use one that has an online platform for ease of record-keeping. Companies who have claimed with EmpowerRD find our online platform invaluable.
Clients can log in, list their challenges, and then return to work. When it’s time to file a claim, all the information they need is saved on the platform, drastically speeding up the claims process.
2. Include all your qualifying R&D expenditure (but nothing else!)
If you aren’t well-informed about the scheme, it can be challenging to figure out which expenses you can claim for. Some people take a more cautious approach and end up not claiming enough, while others go too far and raise flags with HMRC.
And with HMRC establishing a new threat risk assessment and R&D anti-abuse unit, it’s more important than ever that you provide a thorough and detailed breakdown of your costs. Partnering with a specialist R&D advisor not only helps to ensure your qualifying R&D costs are accurately accounted for, but also that your claim is optimised and compliant.
3. Track all eligible costs
It’s critical to keep track of your eligible expenses over the financial year in the same way that it’s essential to keep track of your challenges.
Make sure you track every hour and unit of staff and materials. It will make your claim compliant and so much faster. Plus, you won’t have the stress of remembering how much percentage of a staff’s salary you should attribute to R&D.
Also, you won’t run the risk of claiming for expenditure that is wrong or falls outside of the financial year! And you won’t run the risk of missing out on eligible costs.
4. Write a compelling technical narrative
The narrative is a series of short paragraphs that you include in your R&D tax claim submission pack. Its job is to provide an overview of the R&D you’ve undertaken and to justify the total qualifying expenditure for the claim period.
Although an R&D tax narrative is not yet required for an R&D tax claim, most specialist advisors recommend including one. Why? The narrative outlines your company’s R&D work and provides HMRC with the information they need to understand and assess the costs you’ve claimed for. Without a technical narrative, you’re really taking a risk.
And with HMRC’s top priority being tackling fraud and improving compliance (read our latest blog on error and fraud in the scheme to learn more about the measures they’ve put in place), the narrative has taken far greater significance. You can find out more about the technical narrative here.
5. Check and check again
Lastly, be sure to thoroughly review your claim before submitting it. Don’t be the person who overlooked the last question on the back of the exam paper. Double-check that all your calculations are connected to your P&L, tax calculations, and the CT600-.
There’s nothing more critical to HMRC than the numbers adding up! All expenses must be matched and consistent so that HMRC can determine which costs are where.
Don’t leave the quality of your R&D tax claim to chance. Contact our team today to find out how our robust approach has helped over 900 companies successfully claim over £130 million.
