Over the past several weeks we have been running our LimeLight campaign, to shine the spotlight on R&D tax credits and how they can benefit your business. You can find links to our previous articles in the blog section of our website by clicking here. In this article we take a closer look at the component parts which form the R&D tax credit claim.
All R&D tax credit claims, whether Small and Medium size (SME) claims or large company (RDEC) claims, are formed of two parts:
The numbers (i.e. the calculation)
The supporting narrative (i.e. the project report)
The ‘numbers’ part tells HMRC how much your claim is worth (and the cash benefit owed to you) and is based on the costs your company has incurred over the accounting period on qualifying R&D activities. We previously shared a blog article which covered the types of costs which may be included in your claim which can be found here.
All these qualifying costs are added together (after any statutory deductions) and entered onto your company’s corporation tax return (form CT600). The effect of this may be to reduce your taxable profits (thereby reducing the corporation tax your company owes) or can even create or increase a trading loss (which can be surrendered to HMRC for a cash repayment).
However, the numbers part is only part of the story. HMRC are unable to approve your claim if they do not understand what you did in the period.
It is essential that every claim is backed up by a robust, well-prepared R&D project report which provides detailed summaries of the work you have undertaken in the period. This report is essential as the HMRC inspector will use this to determine if your claim is valid.
The drafting of the project report need not be an onerous task. The report does not need to contain detailed write-ups of every single project you worked upon in the period. All that needs to be included is a representative sample so that HMRC can understand the nature of the work you have undertaken and gain comfort that you understand the concept of what does and does not qualify for the relief.
How an R&D project report is prepared is as much an art as a science. It is important to use the right terminology and present the information in the correct way, making sure you provide all the information HMRC need to assess your claim.
This is where the support of an experienced R&D specialist chartered tax adviser (CTA) can help. Not only can they help you to identify your qualifying projects and associated costs, an experienced adviser can advise you on what information HMRC need to see and how to present this in the correct way. This experience can significantly increase your chances of a successful claim.
The two parts to the claim are submitted to HMRC along with your corporation tax return. If you are an SME company your claim should be processed within 28 days of submission and any repayment(s) paid directly into your company’s bank account.
The above may seem a bit daunting, but it needn’t be. Lime R&D’s experienced chartered tax advisers (CTA’s) are able to work with you to prepare your claim and take the stress and uncertainty out of the claim process.
We are an independent firm of experienced Chartered Tax Advisers who specialise solely in Research and Development tax credit claims. We offer a unique and refreshing approach which makes claiming R&D tax credits straightforward and more accessible. Contact us today for a free no obligation chat where we can discuss your business and help to assess your eligibility to make a claim.
The R&D Tax Credit Specialists
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