How To Claim R&D Tax Relief in the UK
How to claim R&D in the UK?
Are you looking to claim R&D tax credits? Whether you're claiming for the first time or have been doing so for years, either independently or with a specialist, here are our top tips for unlocking one of the most generous incentives available to UK businesses engaged in projects aimed at achieving scientific or technological advancements.
First and foremost, we recommend engaging a specialist to help you navigate the framework for claiming R&D tax credits. While it is possible to claim independently, working with a specialist ensures that the projects you submit, along with the associated costs, are correctly identified and compiled using a robust methodology. In many cases, companies approach us with claims they have already submitted and had paid out, or with HMRC inquiries. What we often find is that these companies do not fully understand the qualifying criteria for R&D and have not clearly presented HMRC with a justification that demonstrates how the core definition of research and development has been met. While preparing a claim can be challenging and there is no fixed approach, there are essential elements that every claim must include.
Currently, HMRC's MREP (Mandatory Random Enquiry Programme) rate stands at just under 20%, meaning nearly one in five claims are being reviewed for compliance and accuracy. In the event of an inquiry, having a specialist on board can significantly ease the process and provide valuable support.
So how does a company unlock HMRC R&D tax relief?
Engage an R&D specialist to support you with preparing your claim. The specialist will hold your hand and make sure that the projects and associated costs have been correctly prepared, with sound methodology that can stand up to HMRC scrutiny.
Clearly outline the projects aimed at making advancements in a field of science or technology. For each project, establish the current baseline of knowledge or capability within the field and demonstrate how your company sought to increase this through addressing non readily deducible scientific or technological challenges. Meaning, these challenges should not be readily solvable by a competent professional in the field. Clearly define the project's aims, uncertainties, solutions, the current baseline of knowledge or capability, and the gap your project sought to address. A specialist can help identify projects with strong eligibility within the BEIS guidelines, while ensuring ineligible projects are excluded. It’s worth noting that many companies undertake fantastic projects that may be innovative or unique but fail to meet HMRC's qualifying criteria from a technical standpoint for R&D. We have seen cases where companies submit such projects, only to face confusion when HMRC rejects their claim because the projects do not qualify.
Prepare supporting evidence to validate the projects, this could include high level planning documents, testing sheets, prototyping information, technical drawings, or anything else which helps substantiate the claim. This evidence will help strengthen the justification for R&D tax relief.
Start identifying the cost categories in your company's accounts where R&D expenditure was incurred during the completion of these projects. Your specialist will ensure that the costs are eligible and that the methodology used to apportion these costs to the relevant projects is accurate and compliant.
Next, collaborate with your specialist to allocate cost headings accurately, ensuring each individual staff or subcontractors contribution to the projects is clearly identified from both a technical and financial perspective.
At this stage, the Chartered R&D Tax Specialist can begin performing the R&D calculations and preparing the necessary supporting computations and tax returns to be submitted to HMRC.
Next, your specialist will align the technical and financial aspects of your claim to create a comprehensive technical report for HMRC, accompanied by the necessary pre-submission form.
Thoroughly review the claim to ensure you are confident in the accuracy of the information and prepared to defend it in the event of an HMRC inquiry.
Once you are satisfied with the claim, your specialist will proceed with the filing process, including completing the online presubmission form and submitting the CT600 along with the supporting documents to HMRC.
Once your claim has been submitted, you can typically expect HMRC to accept it within 4-6 weeks. Depending on the type of benefit—whether a corporate tax refund, payable R&D credit, or future relief—your benefit will be reflected accordingly.
If you would like to claim R&D tax credits, need more information, or are looking for a specialist to help you navigate the changes to the R&D tax landscape, please contact info@levygera.com.
Our team consists of Chartered Tax Advisors and technical specialists with strong experience in supporting companies across a wide range of industries to unlock R&D tax credits. Earlier this year, our team was recognised as the UK’s Best Tax Recovery Services Company at the 2024 Business Elite Awards.
Our process is smooth and transparent, and we do not charge for the assessment, preparation, or submission of your claim.