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Plenty of companies don’t claim the R&D tax relief they’re entitled to and HMRC’s investigations into abusive claims are on the rise — so which way do you turn?
This key tax benefit is nothing to be afraid of and getting the money your businesses is owed is simpler than you think if you follow Catax’s Top 10 Dos and Don’ts:
- DO remember that you don’t have to shell out large sums of money to discover if you’re eligible. Most R&D tax advisers will only charge a fee if you are entitled to make a claim.
- DO keep accurate records of expenditure and project activities wherever possible. You may not know yet what qualifies as R&D but, if you wait, you may not be able to recover the information you need to support a claim.
- DO remember that staff costs make up the bulk of most R&D tax credit claims. So keeping an accurate record of how much time staff (and contractors) spend on key projects is encouraged.
- DON’T assume you won’t qualify. The definition of R&D is deliberately inclusive — there isn’t a single industry that doesn’t perform R&D somewhere.
- DO understand the definition of R&D yourself. Plenty of people think it’s just for scientists and mistakenly never claim. Actually, it can be applied to any company seeking an industry-wide technological advance, where technological uncertainties and challenges need to be overcome.
- DON’T assume accountants are the best people to make claims. Accountants are usually generalists and we correct plenty of mistakes made by accountants. That’s why they use us. R&D tax benefits are a specialist area governed by unusual rules. Don’t be afraid to seek specialist help — there are a number of established specialist firms out there.
- DO ask questions! Look up the background of your adviser, their expertise and how long they have been making R&D tax credit claims. Ask them for relevant testimonials, about the sectors they have claimed in, the size and experience of their team and their links to professional bodies.
- DO seek a second opinion if it sounds too good to be true. UK firms claim legitimately for all kinds of things from better ways to smoke fish to new construction techniques. Don’t assume your adviser is right — ask them to explain how your innovative work satisfies the rules.
- DO choose a company that will support you at no extra cost. HMRC challenges should be expected because a certain number are carried out each year. However, some R&D tax relief consultants won’t deal with investigations and others charge extra. If they’ve done their job properly, it will be resolved favourably after HMRC has satisfied itself that the claim is a legitimate one. Vouching for their own claims shouldn’t cost extra.
- DO remember that failed R&D projects qualify for tax relief in the same way as successful innovations.