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What Records do I Need to Support my R&D Tax Credit Claim?

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A question we are often asked at Lime R&D is “what records or evidence do we need to support our claim?” Unfortunately, there is no ‘one size fits’ all answer and will depend on a number of factors.

In essence, the extent of evidence expected will depend on whether you are new to R&D tax credits or have been claiming for years.  It can also depend on the size of your company, your normal record keeping processes, and the industry you are in.

New to the game?

If you are new to R&D tax credits, it is likely that you were not aware of them before.  As such, how could you have known to jot down notes and track cost details at the time you were doing the work?

If this is you do not worry. HMRC accept that first-time claimants are unlikely to have detailed contemporaneous records to support their R&D work. You are not prevent from claiming if you have no specific records of R&D time. What we find is that HMRC take a more relaxed approach to your first claim and accept informed estimates and judgements, provided they appear reasonable.

Know the game inside out?

However, if you are an R&D tax credit veteran, HMRC now expect to see that you are taking steps and making more of an effort to track your project work and the associated costs more closely.  Rather than looking back at the end of the year and scratching your head, they now expect to see that you have at least tried to track the information at the time, i.e. make an effort to gather contemporaneous information to support your claim.  This is not necessarily a bad thing. We often find that companies that track data and stats throughout R&D projects have a larger value claim as they include more associated costs, costs that could have been forgotten about if the data was not logged.

How sophisticated and detailed should your record be?

This will depend on the type of your business, the industry you are in and your current systems.

For example a professional services company, where staff prepare time sheets, could reasonably be expected to modify their time sheet recording procedures to track this time.  Alternatively, a small manufacturing company with a handful of staff on the shop floor would not be expected to implement a time sheet system.  A common sense approach is required here.

HMRC would expect to see that you have implemented a system which is realistic for your company.  They would not expect you to implement an onerous system that will cost you and your staff significantly. The key is to implement an appropriate real-time procedure to identify qualifying R&D projects and associated costs in a form which best suits your business. There is no set record-keeping requirement, and HMRC understand that records kept by individual companies will vary.

The level and method of record keeping adopted will depend on your business and its needs.  Whether you adopt a time sheet system, or schedule quarterly project reviews, with minutes taken about the nature of work, who was involved and the associated costs, or simply spend a bit of extra time in senior management meetings jotting down some notes. All this can help increase the robustness of your claim and make the whole claim process easier for you.

Lime R&D can help advise on good practice in this area.  Our chartered tax advisers have years of experience in helping companies make successful and strong R&D tax credit claims.  We are here to help you.

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Lime R&D is not your average tax consultancy. As the only firm of Chartered Tax Advisers dedicated to R&D tax credits in Wales, we pride ourselves on our refreshingly unique approach to Research and Development (R&D) tax credits which makes the claim process simple and straightforward.

We specialise exclusively in R&D tax credits – this level of specialism provides us with a more thorough understanding of the tax legislation, HMRC practice and how it could impact your business. Based in South Wales, we are passionate about helping Welsh companies from all sectors successfully claim what they are entitled to, which often equates to tens of thousands of pounds or more.

We appreciate that the claim process can be a little overwhelming. There is so much information available that it is hard to know where to begin. Our Chartered Tax Advisers provide a complete R&D service ensuring your claim is fully optimised, providing you with peace of mind and confidence, whatever your industry, size or structure.

More companies qualify for the relief than you may first think. You do not need to be undertaking cutting edge research to make a claim – this is the biggest misconception surrounding R&D tax credits. You simply need to demonstrate that your company has undertaken work which was not routine or easy to achieve. Our experienced advisers can help pull all the necessary information together and present it in the correct way.

All this can be done risk free – if you do not receive a benefit then Lime R&D won’t charge you anything! Contact us to speak to one of our specialist Chartered Tax Advisors.

 

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