Research & Development Tax Relief – making a success of your claim

Research & Development Tax Relief

The Tait Walker team have been making Research & Development Tax Relief Claims on behalf of our clients since the legislation came into force 18 years ago. Our accumulated experience of how the legislation works is a real benefit when it comes to R&D claims.

R&D is available to limited companies working in various areas of science or technology, and in multiple sectors. It is available to those who have sought to achieve an advance in knowledge in their field by overcoming uncertainties.

We know what qualifies as R&D and how to ensure a claim complies with the complex rules and regulations. We have generated more than £35m in cash refunds for our clients over 600 claims.

North East businesses have historically lagged behind in terms of claiming the Research & Development Tax Reliefs they’re entitled to. Nonetheless it is expected that R&D will cost the government £3bn next year.

However, as with any Government program where there are significant amounts of funds at stake, new organisations will spring up seeking to provide assistance. Our advice to North East based companies is to choose their adviser carefully. HMRC are now stepping up their processes of policing claims because they are seeing a reduction in the quality.

Recent discussions with HMRC have highlighted that there is an increased focus on what they consider to be fraudulent Research & Development Tax Relief claims, or for claims surrounding activities which aren’t actually R&D. HMRC recently rejected a claim of visiting a toy fair to find out what will be next year’s biggest seller.

Common Issues

The HMRC R&D unit have found that they are increasingly seeing issues with claims, including:

  • Vague description of advances and uncertainties
  • No references to a competent professional or why the professional is “competent”
  • Claims that are unable to show qualifying expenditure split by project
  • Overload of information – the narrative should be no more than 2,000 words per project

Claims are being pushed back to organisations if these issues are found. The key to success is to properly identify, quantify and narrate the R&D projects you have carried out in such a way that HMRC fully understand what you are claiming for and  bring the chance of HMRC enquiry to a minimum.

Software

HMRC are also in the process of drafting new guidance, specifically relating to software development. This is because they are finding that people are trying to claim for “routine” work. Software can be a difficult area for businesses to understand. What is considered to be “innovative” is moving at a fast pace.

Areas of contention include:

  • Testing – the taxpayer needs to explain what the purpose of the testing is, not just that it has occurred
  • Agile work – agile as a concept simply means that the development process contains lots of small projects, which then add up to one big project (rather than “waterfall” development). But “agile” working is a project management methodology, not an advance in technology
  • Understanding the technical baseline of the project – lots of software development which may appear novel is in fact carried out using existing software development kits (SDKs) and templates which are available from public sites
  • HMRC wants to understand the underlying technology and why it represents an advance, rather than focusing on features and how the user experiences the software
  • Claims for working out what methodology to use when many are standard (the claim does not consider the concept of “routine” development)

We have worked on lots of successful software development claims and are familiar with the technical aspects of software development. An adviser should help you understand the nuances of the process and the differences between routine work and R&D in the field of software development.

Don’t take the risk

Getting a Research & Development Tax Relief claim wrong could be costly for the company. As well as potential penalties and interest for incorrect returns, you may incur substantial professional fees to fix it.

Speak to us about how we can apply more than 18 years of knowledge and experience to support you in making accurate and robust R&D claims.

Contact us

Speak to our specialist team by calling 0191 285 0321 or email us at advice@taitwalker.co.uk.

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