Blog: Tax Talk – Research & Development Record Keeping

Date: June 3, 2019

By Nigel Holmes, Head of R&D Technical Operations at Catax.

HMRC makes it clear in their guidance that they do not expect a claimant company to have kept separate R&D costings in order to make a claim. That said, it is worth highlighting a few comments and hints to help maximise a claim.

HMRC would expect larger entities or those with a track record of R&D tax relief claims, as opposed to first-time claimants, to start keeping some form of improved records for R&D, without the need to establish a full new book-keeping system. This could include starting to keep timesheets for R&D projects or posting materials invoices to a job costing system that relates to a particular R&D job.

The more accurate the records, the more robust the financial aspects of a claim, and in the unlikely event of an HMRC enquiry, the more straight forward it is to deal with.

Probably the most difficult challenge for new claimants is estimating staff cost percentages for the time spent on projects. We have the Catax Apportionment Tool (CAT) to help clients estimate this figure and suggest increases or decreases based on industry averages data from our client bank (anonymised of course).

Another aspect clients usually overlook is the Qualifying Indirect Activity time linked to projects such as finance, admin and maintenance time. Even if a timesheet system is adopted, these costs will usually need to be extracted separately for the claim.

Keeping track of capital expenditure is also beneficial in assisting with a Research & Development Allowances (RDA) claim.

At Catax, the very least we would want to look at are payroll records and seek example invoices for materials, subcontractors and software, and copies of expense claims for reimbursed expenditure.

There is no “one size fits all” to R&D record keeping, the more a client can do the more accurate the claim will be and the faster Catax can process the claim. That said, we do not expect our clients to invent a complicated book-keeping system merely to justify a claim’s value.

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