Blog: R&D tax relief: The Claiming Process Explained
- R&D Tax Credits
- UK Business
- 5 Min Read
If your company is working on innovative projects in science and technology, you may be eligible for Research and Development (R&D) Tax Relief. The R&D Tax relief scheme is to support companies that are actively working on innovative projects in science and technology.
When claiming R&D Tax Credits, the size of your company determines what rates you are eligible for, and whether you are considered SME or RDEC. As of April 1st 2023, the rates for the R&D Tax Relief scheme changed, and are as follows:
- Expenditure incurred on or after April 1st 2023, the RDEC rate has increased from 13% to 20%
- The enhancement rate for SMEs is now 86%, reduced from 130%
- A company that is loss-making can claim £27 for every £100 of R&D investment. (A company is considered R&D intensive where its qualifying R&D expenditure is worth 40% or more of its total expenditure)
More information on the SME and RDEC schemes and their rates can be found here.
In August 2023, the process for claiming this relief was updated to make it more efficient and prevent the amount of fraudulent claims submitted. HMRC has established a streamlined process that all companies must follow when claiming R&D Tax Credits.
We’ve split the claiming process into 3 sections below.
- Checking that your project is eligible for R&D Tax Credits
- Our Process
- Submitting your R&D Tax Credit claim to HMRC
How to check if your project is eligible for R&D Tax Credits
To qualify for R&D tax relief, the work done must be part of a specific project aimed at advancing science or technology. However, you cannot claim the relief if the advance is in fields such as
- The arts
- humanities,
- social sciences, (including economics).
The project should be related to your company’s trade, which could either be an existing one or a startup based on the R&D results. To claim the relief, you need to explain how the project:
- sought to advance the field
- overcame scientific or technological uncertainty
- could not be easily solved by a professional in the field
- aimed at creating an overall advance in the field
Project details
Your project can either research or improve an existing process, product, or service or develop a new one. To show that there was scientific or technological uncertainty, you must demonstrate that neither your company nor an expert on the subject could say whether the advance was possible or how it could be done, despite referring to all the available evidence.
Your project details must explain how you tried to overcome the uncertainty, which could involve research, testing, and analysis to develop it. Additionally, you should provide a simple description of the successes and failures encountered during the project.
Finally, you should explain why a professional in the field could not easily solve your advance by showing that other attempts to find a solution had failed. You can also show that the people working on your project are professionals in that field and get them to explain the scientific or technological uncertainties involved.
If you would like more information on the claiming process for R&D Tax Relief or would like help to check if your R&D project is eligible, we can help. Get in touch with us here.
Our process
1 Step 1: Getting to know you
We know that every business is built in a slightly different way. So an integral part of our process is to get to know you and your business to find out what is important to you, where you are in the market and where you want to go. With a team of analysts based across the country, we have the flexibility to offer either a phone call or an onsite visit. We know that time is a major factor in all businesses, so we can be flexible and work around you. In this meeting we would usually explain our processes and how we will work together.
2 Step 2: Data gathering meeting
As much as we take up most of the work in preparing your claim, we do need your input. In this meeting we get into the detail of what your company does and which projects will form your claim. HMRC have outlined a set of criteria in order to identify eligibility, our technical analyst will explain what these are and identify which of your products or services would qualify for the scheme.
We have found that using technical analysts with experience in your specific sector, is a great way of identifying the aspects involved in creating or making a product or new process. With an understanding of the iterative steps that can be found in daily activities they are able to uncover details that can help maximise your claim value.
3 Step 3: Generating a claim report
The technical report is an outline of the processes involved in the creation of your product or service and the financial evidence of your spending around it. HMRC have a level of detail that they require to be included in a report and we have an internal team that will ensure that the report meets these. Before we submit the technical report a draft will be sent to you for review.
Our aim is to make sure that you can continue to realise your maximum potential through innovation. And in order to ensure that you receive the maximum R&D tax relief possible, our process in submitting your claim includes a review of your company financials by our team of tax specialists, who will agree on your tax position and notify you of any changes to optimise your overall tax position.
4 Step 4: Managing the claim
Once you have signed off the technical report we will submit it to HMRC. We are confident in our process and as a standard part of our service we provide enquiry defence, so in the event that HMRC has any questions, we will communicate with them on your behalf.
HMRC has its own internal process which can sit outside our estimated delivery times, but our dedicated support team maintain regular communication so that we can keep you updated on the progress of your claim. If your business needs early access to your R&D Tax Credit benefit, we have an R&D Advanced Funding option that may be suitable.
Once the claim is successful and HMRC has made payment of your claim we will pass the money directly on to you with a detailed explanation of how the tax savings have been calculated and applied.
Submitting your R&D Tax Credit claim to HMRC
To ensure that your claim for tax relief is valid, it’s important that you follow these steps before making your claim.
1. For accounting periods starting on or after 1 April 2023, it’s crucial that you check whether you need to submit a claim notification form to HMRC in advance of your claim. This will help to ensure that you have provided all the necessary information required to claim R&D tax relief.
2. Additionally, starting from 8 August 2023, you will need to submit an additional information form to support your claim. Be sure to find out how to send this information and what to include when submitting detailed information before claiming R&D tax relief. You can read more about the additional information form here.
Where does the additional information form fit into the R&D claim process from 8th August 2023?
1 Step 1: Notifying HMRC
To claim Research and Development (R&D) tax relief for accounting periods beginning on or after 1 April 2023, you may need to notify HMRC. It's important to note that the latest date you can submit the claim notification form is 6 months after the end of the period of account that the claim relates to.
2 Step 2: 'X' Marks the spot
Mark 'X' in box 656 of the Company Tax Return if you've already submitted the claim notification form (step 1). This will ensure efficient and accurate processing.
3 Step 3: Additional Information Form
Ensure that you complete and submit your additional information form as soon as possible. Don't forget to put an 'X' in box 657 of the Company Tax Return to inform HMRC that you have submitted the additional information form.
4 Computation
Complete the computations for the relevant accounting period.
5 CT600L
Complete and send HMRC the supplementary form CT600L if you’re claiming payable credit or expenditure credit.
Start your R&D Tax Credit claim today
Our team of R&D tax relief experts is here to support all business owners worried about these changes. You can get in touch with the team to request an informal callback.
