The UK government has rolled out an R&D tax credit scheme to encourage the private sector to invest in innovation. If your company is eligible to file a claim, then here are some tips to make the process less complicated.
Know the tax scheme that applies to your company
You have to begin by identifying whether you qualify under the SME or RDEC scheme. To be identified as a small company you must:
- Have fewer than 500 employees
- Have a turnover of less than £100 million
- Have a balance sheet less than £86 million
If you don’t meet these criteria, then you will automatically fall under the RDEC scheme for large companies. The qualifying criteria for expenditure in both schemes are similar but it is generally more lucrative for SMEs.
Claiming R&D tax credits if your company received a grant
Another important point to consider is whether your company received grants for the project you are claiming R&D tax credits for. If you received a notified state-aid grant, your projects will be disqualified from the R&D tax credit SME scheme. On the other hand, if your company received a non-notified state-aid grant, the project will qualify for an R and D tax credit. If the whole project was funded by the grant, you will need to file under the RDEC scheme which allows you to recover up to 9.7 per cent of development costs.
Be aware of what qualifies and what doesn’t
This will take up most of the time needed for the filing process. Understandably, there are several complexities that may cause HMRC to raise red flags and put an enquiry on the claim.
- You must file a claim for your company’s financial period rather than the HMRC tax year.
- Directors should not be claimed for under subcontractors. Any directors that appear in the Companies House including their dividends should not be included in the claim.
Choose the right project
A claim can typically cover multiple projects. Depending on the context, the word project can mean a lot of things. It can mean a whole project as it is delivered to the market. It can also mean the R&D developments of a company that fall under a single outside facing product.
Write a compelling technical narrative
The narrative should be written from a technical and not managerial standpoint. HMRC wants to see evidence that you worked hard to resolve a technical uncertainty.
Fill out the CT600 form accurately
An essential part of the documents you need to submit is the CT600 form. The form needs to be filled out correctly to avoid delays in the claim process. Don’t hesitate to seek the assistance of a specialist for more complicated calculations.
Lastly, be sure to go over everything several times to reconcile possible errors and factor in any revisions if needed. The success and timeliness of receiving credit for your claim depend on how accurate your documents are. If done correctly, you may receive the credit as quickly as two weeks from filing. In some rare instances it may take longer, but as long as the claim is approved all you need to do is wait.