R&D Tax Credits: A quick guide to technical reports
A tax rebate for investment back into your company
R&D Tax Credits aren’t given out by HMRC automatically - companies have to apply. And it’s no secret that making a claim is a tough gig.
One thing many people struggle with is a vital part of the application process: the technical report. Here’s our quick guide to help.
First off, what are R&D Tax Credits?
“The research & development (R&D) tax credit is designed to encourage innovation and increase spending on R&D activities for companies operating in the UK.” - Myriad Associates
Launched in the year 2000, R&D Tax Credits act as an incentive for companies to innovate, developing new, pioneering projects that really put them on the map.
It’s a fantastically generous scheme too, offering up to 33.35% of a company's R&D spend back. This is either via a reduction in Corporation Tax or as a cash credit.
According to latest government data, £5.3 billion of R&D tax relief support has been claimed across 2018 and 2019, translating to £35.3 billion of expenditure on R&D projects. Companies large and small have benefitted having undertaken research and development in creating or modifying existing products, services or processes. It’s serious cash not to be sniffed at.
So what’s the point of an R&D technical report?
The technical report is basically the meat and potatoes of your R&D Tax Credit application. It’s a written narrative that details your R&D project, details about your company, your costs and more. The key is in knowing the perfect formula - including what to leave in and what to leave out.
The primary function of the R&D technical report is two-fold. Number one: to explain why your company and your project is eligible for R&D Tax Credits in the first place, and number 2, to help HMRC spot any fraud.
HMRC holds the public purse strings as the UK’s authority on all things customs and tax. Unfortunately, R&D tax relief fraud does happen, which is why the application process for R&D tax relief is so thorough.
There’s a definite knack to it
Think of your technical report as your chance to ‘persuade’ HMRC that your project and your costs should be awarded R&D Tax Credits and why your company should benefit.
Firstly: Don’t go it alone. Whilst it might be tempting to submit a claim without specialist help, it’s really not worth the risk. An unsuccessful application can draw attention from HMRC inspectors who will likely ask questions. They may also want to look into your wider tax affairs (time consuming, expensive and generally painful). This makes it even more important to use fully guided professional resources like Tax Cloud.
And secondly? Don’t rush it! Yes you’re busy, your team are busy and there just aren’t enough hours in the day. But with average claims sitting at around £60,000 it’s well worth setting time aside to do it properly.
What should be included in an R&D Tax Credits technical report?
Broadly speaking, the narrative should cover the key points that HMRC are interested in, including:
- What technical or scientific advances the project aimed to address
- What difficulties cropped up along the way and how they were tackled (again these should be purely scientific or technological)
- Which scientific or technological area the company operates in
- Whether competent professionals were used to actually do the work
Crack these few points and you’ve got a solid foundation.
There are a few other tips and tricks to bear in mind when it comes to writing your technical report using the Tax Cloud portal.
The first thing is to keep it short. Not so short as to miss things out, but go for paragraphs that are concise with plenty of factual statements. Remember, somebody super busy at HMRC is going to be reading it, so don’t blind them with science or jargon. It’s a bit of an art form that our team will help you with.
Second thing is, stick to the technical stuff. Don’t go on about any commercial, staffing or marketing issues or similar. This is pure scientific and technological cold hard facts.
Thirdly, link everything back to the costs you’ve included in your CT600. This will show HMRC how the two actually relate to each other.
We’ve included a few extra tips in our recent article How Many Technical Reports Do I Need For My R&D Claim? that are well worth taking a look at too.
What not to do
The beauty of the Tax Cloud portal is that at every step our specialist team will check your application and soon spot any errors or weaknesses. This means that when you hit submit, you’re safe in the knowledge it’s as accurate and effective as it can be.
One of the big problems when it comes to technical reports is waffle. Lots of superfluous stuff like staff qualifications and scene setting won’t put you in a good light with HMRC. In fact it can even look like you’ve got something to hide.
Speaking from too much of a managerial viewpoint is another one. The whole reason behind the technical report is to get across to HMRC the complexity of your technological or scientific project. Therefore, focussing too much on the processes themselves is no-no. Take off your management hat and slip on a scientific one!
Tax Cloud: The UK’s leading R&D tax relief self-service portal
Powered by the R&D specialists at Myriad Associates, Tax Cloud offers an affordable solution for any company looking to claim an R&D tax rebate. Large or small, profit or loss-making, any UK company can apply with claims quickly running into the thousands.
Simply sign up online and work through the easy-to-follow claims process, gradually moving step-by-step. It’s fully supported so you’re not just left to get on with it either. Our team are on hand at all times and will be happy to answer any questions you may have.
- 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