What is R&D? Could my business qualify?

The first thing to know about R&D is that it’s not all about lab coats and Bunsen burners. You don’t need to be working in full-on mad scientist territory to be eligible for R&D Tax Credits. Any time you’re putting time and money into pushing the boundaries of what we know and what we can do in a technical field, there’s a good chance there’s some qualifying R&D in there. That includes:

• Finding innovative new uses for existing technology.
• Making your products or processes more efficient or effective.
• Developing, prototyping and testing new products, services or ideas.
• Getting business done in a safer, cleaner or ‘greener’ way.

What’s involved in an R&D Tax Credits claim?

Making an R&D Tax Credits claim can be a time-consuming process and in industries with a history of under-claiming for R&D (construction, for example), one of the main issues surrounds a lack of understanding of how broad the R&D field is. So much innovative work gets buried in the foundations of construction, because solving complex problems is just part of the day to day.

To get R&D right, the best way to approach it is to put in place ways of capturing the work as it happens. Although this wouldn’t necessarily be expected with your first R&D claim, going forward it would be anticipated by HMRC. Ideally you’ll need records of your potentially qualifying expenditure, along with systems for tracking it whenever it happens. When you’re right at the start of your journey, you won’t necessarily know every problem you’ll have to solve along the way. That means you won’t always know in advance how much R&D you’ll be doing. Spotting and recording your R&D costs when they crop up is a huge part of any successful R&D Tax Credits claim.

An R&D tax consultant such as RIFT will do all the heavy lifting in both identifying qualifying expenditure and writing a compelling technical narrative in a format native to HMRC. This will give you direction and reassurance before submitting your R&D claim through your accountant, knowing that you’re maximising everything you’re entitled to claim within the boundaries of the scheme.

Are there any pitfalls or dangers to watch out for?

In the unlikely event that HMRC raise a query once your claim is submitted, there’s no need to panic, this means they want to understand your project better in terms of the narrative or the cost. However, any enquiry should be treated seriously. It isn’t something to skimp over as HMRC will penalise you for doing so.

At this point the R&D projects and their costs are itemised. You’ve filed your claim correctly, but HMRC have a couple of questions as part of their due diligence checks. This is to make sure that you have applied your projects correctly for R&D tax relief as well as to protect the integrity of the scheme.

If your claim is fundamentally correct and has been completed through an R&D consultant such as RIFT, you’re more than likely to have little to worry about, as this will be a box ticking exercise which your agent will be able to handle comfortably. In the case where you have compiled and submitted your own R&D claim, it is possible to find yourself out of your comfort zone with little to no experience of handling a HMRC query. But fear not, you can still reach out to RIFT who will be able to pick up the baton, review and assess your claim before providing an experienced hand to manage the enquiry.

Depending on the situation, HMRC might raise the stakes with a personal meeting or video appointment to ask a few questions. This doesn’t always mean anything’s gone seriously wrong. It might just be that they want to take a proper look at you before okaying your tax credit. If a mistake in your claim is found, you should get a chance to correct it. 

Can I claim again?

Absolutely – and you definitely should! R&D is an ongoing process, so most businesses with qualifying projects end up claiming yearly. Of course, your costs, innovations and obstacles will change over time, so you can’t just keep submitting the same claim in the same words.

Depending on what you’re working on, your projects might span several years, changing and growing along with your business. On the other hand, agile, fast-moving businesses might find themselves taking on new and exciting projects all the time. Either way, RIFT would be glad to help you embed awareness of R&D right at the heart of your firm when it comes to making the most of your innovation, helping you capture and maximise your return form the scheme year after year.