R&D Tax Reliefs – Get Organised

Rishi Sunak’s Spring Budget identified that R&D tax reliefs can be part of the effort to help the country bounce back from the effects of the Coronavirus pandemic by recognising the innovations made by businesses and aiding their growth through R&D tax reliefs. The announcement stated an ambitious target of raising total investment into research and development to 2.4% of UK GDP by 2027. R&D tax reliefs play a huge role in encouraging this investment with over 88% of those claiming it being SME’s.

The recent consultation by HMRC was with stakeholders to ensure that R&D tax reliefs are current, competitive and the appropriate recipients are identified. This means that hopefully the scheme will become accessible to those who may have thought previously it was not relevant. R&D tax reliefs can provide your business with additional funds to grow and innovate into new products, processes and services. It is worthwhile remembering that it is not just the current year that you can make an R&D tax relief claim on but past years too if there are eligible projects in your recent history. This is all additional money from HMRC that you could be legally entitled to, in order to increase the growth of your business, so having your records up to date could be extremely (financially) beneficial.

How you keep records will often be determined by what type of company you are. If you are a large business, then processes will often already be in place and record keeping should be more thorough.  If you are a start-up or smaller business who is more adaptable and is able to flex your working style due to your size, then the records kept could be more sporadic due to no previous processes being in place. Regardless of the prospect of an R&D tax relief, processes and documentation should be written from the outset of a project and continue in real time as it progresses, to help understand how successes and failures occurred, and to either embrace or avoid them next time.

In order to make a successful R&D tax relief claim you need to be able to provide project planning material that should cover:

• what the R&D aim of the project is, that is what advance in science or technology is being sought
• a link between the outcome of the R&D project and its effect on the commercial prospects for the company
• a review of the current state of knowledge in the specific area of R&D
• what difficulties are foreseen for the project, including scientific and technological uncertainties
• a structure for the project setting out the activities, who will undertake them, and what the stages are that need to be achieved to get the desired result
• notes on the particular expertise specific employees, consultants or subcontractors will bring to the project, why they have been selected and what they are expected to do

Such detailed project plans and record keeping may seem laborious and unnecessary, but it needs to be remembered the vast financial benefits this could bring to the growth of your business. Being able to supply such detail enables you to make justified and often bold claims that you may not have felt feasible before if the project plans were not in place. It also avoids additional scrutiny from HMRC on the R&D tax relief claim if you have provided detailed information from the outset, therefore processing of the claim (and money to your bank!) is much faster.

So, there is no need to add additional post it notes, dividers or highlighters to your stationery order, just get digitally organised from the concept of a project to make sure it is easy to keep up to date in real time and easily accessible when complete to make a claim.

If you would like to speak to a member of the tax team about your business and whether an R&D tax relief scheme would be relevant, please get in touch on 01628 770 770 or email [email protected] or [email protected] 

https://www.wilson-partners.co.uk/services/sme/business-tax/rd-tax-credits/