When accountants and their clients start looking into claiming R&D tax credits, they are often struck by the complexity of the application process. Usually, they get faced with the daunting prospect of completing many tasks. Most of these involve detailed research and reports to boot.
Some of this is unavoidable due to the amount of information HMRC requires for R&D tax credit claim applications. Yet, we’re here to tell you that it doesn’t have to be so labour intensive. In fact, with these six simple steps you will find applying for R&D tax credits easy.
Applying for R&D tax credit
All applications for R&D tax credit go to HMRC (Her Majesty’s Revenue and Customs) – the UK’s authority on customs and payments. Their primary function is to collect taxes and fund public services and provide for those in need. They also aim to prevent dishonest individuals from cheating the system. This is why the application process for R&D tax credit is so thorough.
R&D tax credits are able to be claimed up to two years after the relevant accounting period, with a maximum of 10 different R&D projects per application. If you wish to claim for more than ten, send an email to: RD.IncentivesReliefs@hmrc.gov.uk.
You should not rush applications for R&D tax credit. This is because an unsuccessful application can result in HMRC investigating the applying business. Inspectors for HMRC deal with a large amount of applications each year. As such, it’s important to compile your application in an easy to understand way, whilst also being accurate and informative. Avoid jargon and focus on being clear and concise in your delivery of information.
The steps to a successful R&D tax credit application
We know the process seems complicated at first. At made.simplr we’ve condensed the steps to make applying for R&D tax credit as straightforward as possible.
As the accountant for the business submitting the R&D tax credit application, you’ll be the one doing most of the heavy lifting. The following bullet points outline the steps you will face when applying for R&D tax credit:
Step 1 – decide on the projects you are claiming for: The first thing you and your client must do is identify which R&D projects and costs you’re eligible to claim for. HMRC needs to know the exact projects and costs, as well as how they meet HMRC guidelines and R&D definitions. This should involve all the company’s technical experts, as well as finance staff and R&D representatives. Getting expert advice in this area can save your client’s company valuable time and help avoid an investigation by HMRC.
Step 2 – choose the scheme that will work for the company: The two choices your client has is between the Research and Development Expenditure Credit (RDEC) scheme and the one for SMEs. The scheme that a business applies to will determine the amount of R&D tax credit they will receive. The SME scheme allows SMEs to claim back 33% of their costs. This compares to 13% for companies applying under the RDEC.
Step 3 – write the technical report: This forms the meat and potatoes of an R&D tax credit application. Here the company should describe in detail why each project was undertaken. The report should thus explain the problems the R&D project intends to solve and how it is going about it. This includes the specific work undertaken, staffing information and what advancements were made. It should also prove that the challenges solved by the project could not be solved by field professionals.
Related: R&D tax credits explained
Step 4 – create a costing schedule: This will collate all the various costs across all the projects you intend to claim. Accurate totaling of your qualifying expenditure is very important. This is to ensure the application will maximise the benefit for your business. However, there are many nuances associated with qualifying costs. This means getting expert help with costing schedules is highly advised. Again, you can learn about the details of these costs in our other blog.
Step 5 – submit the claim: Once you have compiled the above documents they have to fill out the CT600. This requires inputting financial calculations into the right boxes. While this seems straightforward, it does allow many opportunities for human error. Some companies can eliminate this possibility through modern technology. At made.simplr for example, we offer software services to input the financial data for you. With all these documents, along with the company tax return and the statutory accounts, you’re ready to submit the application!
Step 6 – HMRC processes and reviews the claim: HMRC aims for this to take between 4-6 weeks to complete this process. After which time they will provide your business with a cheque to cover any R&D expenditure. It’s important to check that the amount received adds up to the expected amount. This will be a combination of the various percentages of the R&D costs identified in the application.
Book a demo with us today & see for yourself how easy it is!
If you choose to come on board with us we’ll help you through each of these steps, guaranteeing the claims process to be a smooth one. Our experts are on hand to help at every stage, which, as discussed, can be crucial. They’ll take care of any questions you or your company may have on confusing areas such as qualifying costs. At the same time they’ll save you time when it comes to completing the written tasks of the application. What is more, our experts’ advice will enable your application to maximise its tax credit reimbursements. Thus giving your client the greatest value for money possible.
Our service also includes automated claims generation technology, allowing you to progress through the above steps seamlessly. This features user-friendly reports and analytics to compile your necessary data easily and without error. What is more, once an application gets sent, our R&D tax credit software can organise and track claims.
Take the weight of an R&D tax credit application off your shoulders and get in touch!
