How to Prepare Your R&D Tax Credits Claim

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If you’ve read some of my previous blogs on R&D tax credits and thought, “that’s all great, but how do I prepare an R&D tax credits claim?” then this post is for you.

As the saying goes, if you fail to prepare then you’re preparing to fail. That’s true in most walks of life, and certainly so when you’re making a highly detailed R&D tax credit claim.

With that in mind, read on to learn how to prepare and claim your R&D tax credits.

R&D Tax Credits: The Simple Guide to Claiming

If you’re new to the world of R&D tax credits, or you’re looking for a complete guide on submitting your claim, head to my post entitled A Starter’s Guide to R&D Tax Credit Claims then come back here to learn how to do the groundwork for preparing your claim.

Of course, it helps to establish first if you should be claiming the first place. Which brings me to covering…

R&D Tax Credits Explained – Are You Eligible?

My post on qualifying criteria for R&D tax credits goes in-depth on this subject, but in general, R&D tax credits can be claimed by any business running a project that uses innovation to advance the fields of technology or science.

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However, it’s important to point out that this innovation doesn’t have to be what you might think of as strictly scientific; for instance, a pharmaceutical company developing new drugs or a computer company producing faster chipsets. It can be in practically any industry – from construction to food to agriculture, energy, hardware and more. All that matters is that you’re solving a business need by creating something fresh using scientific or technological methods, and can accurately account for the time and resources used along the way.

All of which leads me neatly to the purpose of this piece.

How do you prepare an R&D tax credits claim?

There are certain things that will definitely help you put together the most compelling case for an R&D tax credits claim – all of which could potentially earn you tens of thousands of pounds in reimbursements from HMRC.

Log your time and R&D-related expenses

If you’ve ever tried to do end of year accounts, you’ll know it can be a nightmare if you haven’t diligently filed your paperwork in date order throughout the year. Trying to remember what you did when, and where you might have put the receipts to back it up, can make claiming expenses a real headache. Not only that, but it can leave you with a less compelling expenses claim, and have you wishing you’d been more prepared from day one.

The same is true when it comes to preparing your R&D tax credits claim – but with the headache increased by several degrees of detail!

I always suggest keeping detailed records of the time and resources your people and business has put into anything related to research and development. Most decent accounting software programs have a notes function that allows for this, and it truly will save you hours (if not days!) down the line. That’s why it’s my first rule of how to prepare your R&D tax credits claim.

Submit an R&D tax claim report containing technical evidence

My second rule around how to prepare and claim your R&D tax credits is to submit a detailed tax claim report containing your costs and the technical evidence for your claim. This isn’t a legal requirement, but the level of detail you go into here can often mean the difference between a successful claim and an unsuccessful one.

Your technical evidence should cover:

  • When the project started and ended
  • Employee timesheets and contractor details to help identify time and hire costs spent on R&D
  • The state of art (SOA) at the outset of your project and how the project improves upon it
  • Any technical uncertainties you noted at the start of the project that would lead to a significant technological or scientific advancement once solved
  • Key unexpected challenges you faced and how you solved them
  • Whether the skill and knowledge the project required was truly the process of research and development. In other words, establishing that it wasn’t available in the public domain, or something a trained professional in your field should be able to deduce within a reasonable timeframe.

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At this stage, I highly recommend working with your team to gather all of this evidence, speaking to the key team members in each department (for instance, payroll, IT, HR, etc.), to gather the correct details and compare it to your own records and understanding of the claims criteria.

Get your claim in as early as possible

R&D tax credits claims can be complicated and lengthy processes, with HMRC likely to ask you for additional details if they feel your initial report lacks detail. While you can submit a claim for tax relief up to two accounting years in arrears, I’d always suggest getting your claim in as early as possible – ideally no later than the first fortnight of quarter four in your firm’s financial year.

Make sure your CT600 form is filled in accurately

Like the technical evidence report, filling out your CT600 form accurately and comprehensively can be the difference between a successful claim and a failed one. It might sound elementary, but taking the time to get these fine details right really is a vital part of how to prepare your R&D tax credits claim.

Work with an expert

Of course, the many things that can go wrong during the R&D tax credits process, and the potentially thousands of pounds it can cost you, is a very good reason to work with someone who knows the process inside out. And if they’re someone who will work to understand your business and industry, so that they fully have a grasp of what you’re about and the technical challenges you faced – even better!

Taking the time to develop that understanding is very much a part of my process – and with 30+ years of experience helping businesses make successful claims across a wide range of sectors, I’m confident I can help you prepare and produce a successful R&D tax credits claim.

If you need someone you can trust to get those fine details right, then get in touch – I’ll be happy to help.

Further reading