What is the most efficient way of submitting an R&D Tax Credit claim?
When it comes to submitting an R&D tax relief claim, the first thing is to make sure that the project your company has recently undertaken definitely qualifies for R&D Tax Credits. Only then can you confidently embark on a tax relief application in an efficient manner, where you know you won’t be wasting a serious amount of time and effort.
What are R&D Tax Credits?
Unveiled in the year 2000 by the UK government, Research and Development (R&D) Tax Credits are essentially a tax incentive that rewards companies for investing in innovation. They are a vital financial source for organisations that want to accelerate their R&D programme and expand their operations.
Any company that has spent money on developing new services, processes or products recently - or that has enhanced an existing one - is likely to qualify for R&D Tax Credits. Once a successful application has been received, the credit is offered either as a Corporation Tax reduction or as a cash payment. The great thing about this too is that the activities which qualify for R&D are incredibly broad - in fact, they span just about every industry and sector. Plus, if you’ve never claimed R&D Tax Credits before, then you can claim relief retrospectively for your last two full accounting periods.
What costs can my company claim R&D Tax Credits for?
There are several types of expenditure you can claim for when you put together your R&D tax relief claim. These include:
- Staff costs, such as salaries, pension contributions, reimbursed expenses and employer’s NIC
- Freelancers, agency workers and subcontractors
- Various types of software
- Consumables including power, heating and lighting that are used up or transformed by the R&D process.
- Payments to clinical trial volunteers
What R&D Tax Credit scheme should I choose?
Before you start your R&D tax relief application, you need to choose the right type of scheme so you can make the correct type of application. This is done by working out whether you need to use the SME or the RDEC scheme.
The SME scheme
This scheme is for companies with under 500 staff. They also must have no more than €100 million turnover or €86 million in gross assets. Most start-ups and small to medium-sized companies come under this category.
The RDEC scheme
The RDEC scheme is aimed at larger companies of over 500 employees. The company must also turn over a minimum of €100 million, or have €86 million in gross assets.
As you can see, the decision about whether to choose to apply under the SME scheme or the RDEC scheme is relatively straight-forward. However, there are a few things, like some contracting and previous grants, that can bar an SME from using the SME scheme. This means that in some cases, a company might need to claim using the RDEC scheme, or even a combination of the two. If you’re still not sure which path to take, speak to us and we will happily advise you.
So now you’ve decided which scheme to apply under and enlisted expert help in defining R&D-related expenditure - but you still need your claim to go smoothly. And that can be down to how you submit it.
What are the options for submitting my R&D Tax Credit claim?
There are two options available when it comes to sending your claim to HMRC. You can either:
- Include it in your tax return if you’ve not yet completed it
- Amend a completed tax return after it has already been filed
For optimum speed and efficiency, we recommend going with option two.
Why use an R&D Tax Credit amendment?
You must include your R&D Tax Credit claim figures on your CT600 form in order to make a valid claim. Tax returns combine the CT600 with your Corporation Tax Return computation.
When your company tax return is sent, it arrives at a general HMRC office to be processed. The staff that do this are not R&D Tax Credit specialists and, with only 10% of qualifying businesses actually applying for their R&D Tax Credits, it’s very unusual that they come across an R&D Tax Credit claim figure. This is simply because it’s not a common part of their administration process.
How can this affect the efficiency of my R&D Tax Credit claim?
As with anything unusual, there can be queries whilst due diligence is carried out. But phone calls, emails, letters and meetings all take time and can mean many companies having to wait several months for their R&D tax relief claim to reach their bank.
So what’s the best way forward?
To help speed things up, the best thing you can do is simply to file your Corporation Tax computation and your CT600 as you would usually, and then make an amendment with regards to your R&D once it’s all processed. It cuts out the middle man by having your paperwork go straight to HMRC’s R&D department, who will better understand your claim and process it much more quickly.
Is this really allowed? It seems a bit laborious
Yes, of course. Your key obligation is to file your tax return accurately. Once it has been filed, you are allowed to make certain updates, and creating an R&D Tax Credit amendment is one of them.
The most important thing is you keep all your accountancy and book-keeping practices going as they are. This means you can then simply add your R&D figures onto a CT600 amendment before submitting your R&D Tax Credit claim.
Looking to find out what your R&D Tax Credit claim could be worth?
In conjunction with Myriad Associates, Tax Cloud UK has developed a highly accurate calculator so you can see at a glance how much R&D Tax Credit your business could claim. With different sections for both businesses and accountants, it allows you to tailor-make your calculation to suit your business so you can save time and money in working it all out.
If you would like to discuss any issues around R&D Tax Credits or need further advice, please do get in touch
- Submitting R&D tax claims since 2001
- 100% success rate
- Over £100m claimed and counting
- Industry leading specialists
- In-house technical, costing and tax experts
- Member of the Research and Development Consultative (RDCC) committee
Meet some of the team behind Tax Cloud