Our team has a wealth of industry and strategic expertise. This allows us to really understand the projects you undertake in your business and think on our feet. Over the years, these are the most common mistakes we’ve seen when businesses make an R&D claim:
1. Believing that their company or project is not eligible
The brilliant thing about R&D tax credits is they are designed to support any businesses that work on innovative projects. Companies in any industry and of any size can benefit from R&D tax credits; there’s no minimum or maximum spend or claim amount, and it doesn’t matter whether the company made a profit or a loss – it’s all about technological/scientific advancement. They’re intended to encourage innovation, and they can provide a valuable cash injection for business owners to reinvest in their businesses.
2. Not claiming under the right scheme
The R&D Tax Credits scheme is subdivided into two incentives: the SME scheme (or small/medium-sized businesses) and the Research and Development Expenditure Credit (RDEC) scheme for larger companies.
Before making a claim, it’s essential to understand which of these incentives your business comes under. Typically, if you have fewer than 500 staff and either not more than €100 million turnover or €86 million gross assets, you are classed as an SME for R&D tax credit purposes. Your next step will be to make a claim via the SME R&D tax incentive. Most companies, including start-ups, fall into this category.
If you are larger than this, you will need to claim the Research and Development Expenditure Credit incentive (RDEC). A few factors, such as grants and subcontracting, may mean an SME would need to claim under the RDEC scheme instead of the SME scheme – or via both incentives.
3. Not understanding how funding and grants impact R&D Tax Credits
If you have received a grant or external funding, it could be viewed as state aid and might impact whether you are eligible to receive tax relief under the SME scheme for the project that’s been funded by the grant. Instead, you will need to use the RDEC scheme regardless of your size, assets and turnover. If your grant was non-notified state aid, your project’s eligibility for R&D Tax Credits is dependent on the proportion of funding that can be attributed directly to the grant. If you’ve received any funding or grants, get in touch so we can help as this can get confusing!
4. Not maintaining accurate records
Claims for R&D Tax Credits can be made up to two years after the end of an accounting period. For instance, if your accounting period finished on the 31st December 2020, you have until the 31st December 2022 to make a claim. It would be hard for anyone to remember details of projects that far back, that’s why accuracy in your record-keeping is really important.
HMRC accept that for the first few claims you may not have detailed records beyond the information in your company accounts. As time goes on, we would want to help you keep appropriate records including project planning information, weekly production schedules, any project documentation, any technical specifications, and any project drawings and revisions. The level of records will be unique for each company – you don’t have to keep timesheets!
Well maintained records will help you make a fully optimised claim; the more information you have available, the easier the claims process will be.
5. Not using the services of R&D Tax Credit specialists
Working your way through an R&D Tax Credits claim is hard work. Even if you’re fully up to date with everything required, the process can be extremely onerous. Mistakes are very easy to make, and unfortunately, even the smallest of errors can lead to delays.
Unless you have the time and expertise to get it right the first time, we highly recommend you speak to specialists like us. Our friendly and effective advice will generate value for your business by delivering the best possible results, both for your claim and for the re-investment opportunities that it creates for your business.