R&D Tax Credits

R&D Tax Credits - Legal Framework

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Hi

I'm FD of an SME in the tech sector.  We have been introduced to a tax practice that specialise in R&D tax credit claims.  They seem to be prepared to take a fairly broad interpretation of what consitutes R&D and, although the guidlines seem clear, it appears to be a recurring theme online that the R&D bar is not as high as you may think.  That said, although having taken advice would illustrate some dilligence, the responsibility for the claim clearly sits with the Directors:

I'd be interested whether anyone has experience of the approval/ review process and an understanding of how long the claims are open to challenge - presumably the usual 4 years for coporation tax or longer if deemed 'careless' and the implications if challenged in review or at a later date...

Any guidance appreciated

 

 

Replies (9)

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By Tim Vane
28th Sep 2016 17:21

You can always apply for advance assurance of R&D from HMRC. If granted this gives you a guarantee that R&D will be granted on the grounds agreed. I would expect a good R&D claims firm to follow this process.

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By pacta
28th Sep 2016 17:42

You have rumbled the profession's greatest secret. R&D Tax Credits aren't that hard.

Your firm will tell you that they will file a super special report in support of your claim. That amounts to putting your words into a bullshit machine by someone that actually doesn't understand why the R&D in hand is actually an advancement in the particular field.

That report then goes off to be read by someone equally clueless about whether a particular R&D project qualifies as an advancement at HMRC.

You might get the odd check. I never have.

What I would want if I were you was a copy of the report they intend to send to HMRC. You need one in support of your claim and within it you should ordinarily include the analysis of an expert in the field to verify that the solution is not readily ascertainable etc. I don't mean an expert in R&D tax claims, I mean the actual technical field.

Getting that report and keeping it should certainly ensure the company meets the "mistaken but with reasonable care" category; which means that there would be no penalty.

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By Manchester_man
28th Sep 2016 18:14

We have a client who should qualify for R&D credits.

I was planning on submitting an advance assurance application.

Woukd we, (Pacta) require an expert report then?

The client has applied for funding from Innovate UK and I need to check whether this would preclude him from claiming, but the funding is going to enable a university to test the invention and provide a report to say that it works.

Woukd we need to wait for this report? Or would we not?

It's this that I'm unclear on, particularly after reading Pacta's above helpful post.

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By pacta
28th Sep 2016 19:18

Sorry if I was misleading. You have the expert - it is your client (or their subcontractor). They must be or they would not be able to undertake R&D (see guidance re readily ascertainable knowledge for a competent person etc.)

The report I refer to is a collaboration between client and you. You file it with the CT Return which includes the claim.

If you go advance assurance route then you've comfort that your later claim is likely to be accepted. You'll need to provide the detail of what R&D is being undertake in the advance assurance anyway which is basically the same stuff that would go in your report.

Re the funding that's a query for research but I'd expect that you could not claim when someone else has funded the research.

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By Manchester_man
28th Sep 2016 21:00

Thanks Pacta, I follow you.

It is partly out of interest, as it is not something I deal with. The R&D is only partially funded, but I suspect this will prevent a successful claim.

I am researching that.

Thanks again for your input and apologies to the OP if I've hijacked the thread!

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By Dib
29th Sep 2016 13:38

Apologies for further hijack. The Innovate UK grant is probably state aid and will scupper any SME R&D claim for expenditure on that project. You could claim large company relief on it though.

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By SteveHa
29th Sep 2016 09:55

I wouldn't even use a specialist firm, who are likely to charge more, and be gone if/when the enquiry comes.

Use your usual accountant instead who will be equally qualified to prepare and submit both the advance assurance and the claim.

Any claims I've done have relied heavily on narrative from the expert at the client's anyway, so if the job is to be done right, you'll still have to do a chunk yourself.

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By pacta
29th Sep 2016 14:59

SteLacca wrote:

Any claims I've done have relied heavily on narrative from the expert at the client's anyway, so if the job is to be done right, you'll still have to do a chunk yourself.

ssSshhhhhhh!

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Replying to pacta:
By SteveHa
29th Sep 2016 16:06

pacta wrote:

ssSshhhhhhh!

Lips - Zzzzzziiiiiiiip!

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