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The #1 challenge in making an R&D tax credit claim

11th May 2018
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Tax Cloud is an R&D Tax Credits claim portal.

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Claiming R&D tax credits is a two-part challenge for most small and medium-sized enterprises. The first part of the challenge is to show HMRC the details of what they have spent on R&D activities, and how that spending conforms to the rules and guidelines that have been published. That’s an accountancy and tax challenge. The second and more difficult part of the challenge is to show HMRC that the work your company has been doing does indeed meet all the criteria for R&D. HMRC’s inspectors don’t have time to study and understand the technology used in your industry, so they need to be told what you’ve done and why it is significant. They need to be told about your projects accurately and precisely in language that is clear and easy to follow.

R&D Tax Credits - What Projects

David Farbey is a Senior Technical Consultants at Myriad Associates and has been preparing technical reports to support R&D tax credit claims for many years.  David has worked in hi-tech industries for over 20 years, and has taught on the Technical Communication MA programme at Sheffield Hallam University for nearly 10 years.  Below, David shares a few tips when is comes to preparing a HMRC friendly technical report:

What is the purpose of the R&D Tax Technical Report and what goes into it?

The Technical Report is a way of demonstrating to HMRC that the work done by a company claiming R&D Tax Relief meets the criteria laid down in the BIS Guidelines. We generally include some background to the Company and to the general industry sector, and explain the context of the technological challenges the Company faced. We then describe the work the Company did and the advancements they made.

What is the best process for producing a R&D Tax Technical Report?

When we meet our clients to discuss their claims for R&D Tax Relief we discuss the financial aspects of their claim, but we also talk about the actual research and development work they’ve done. We try to have a good understanding of what they are doing beforehand, but sometimes the sector they work in is very specialised so that’s hard to do. Most of our clients are happy to talk about their work, and sometimes we need to make sure they stay focused on what’s relevant for R&D.

After our meeting we draw up a draft Technical Report and ask for feedback, and occasionally for clarification of certain points. Our clients are busy people and we aim to take up the minimum possible amount of their time, so we put every effort into getting the Technical Report right first time.

The approved report is incorporated in the R&D Tax Relief claim. Although we contribute our expertise in writing the report, it’s important to stress that it’s always the client’s report, not ours, and the client always has the final word on approving the content.

Why should you use a expert to produce the R&D Tax Technical Report?

R&D technical experts don’t just have a thorough understanding of technology they also understand the R&D tax relief rules and guidelines.  This allows them to prepare technical reports that explain the technology and highlight’s qualifying activities that is understandable to a HMRC Inspector. When the claim is reviewed by HMRC, they will have all the information they need right away, which means the claim will be processed quickly and without queries.  The last thing anybody wants to do is full down the HMRC trapdoor.

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