Help to see if your work qualifies as Research and Development for tax purposes

HMRC has updated documents to help companies understand if their work qualifies as Research and Development. To skip the summary and head straight to the documents click on the link below

https://www.gov.uk/government/publications/help-to-see-if-your-work-qualifies-as-research-and-development-for-tax-purposes-gfc3

Research and Development (R&D) tax reliefs were introduced in a bid to support UK companies working on innovative projects in science and technology. Before submitting a claim, you will need to consider if your activity will be eligible for R&D tax reliefs.

According to HMRC, It is very unlikely you will be eligible if your activity:

• will not be recognised as a scientific or technological innovation
• has already been conducted or is currently being conducted elsewhere

HMRC goes on to state that the type of claims which is rarely eligible for R&D tax reliefs include those made by:

• care homes
• childcare providers
• personal trainers
• wholesalers and retailers
• pubs
• restaurants

You also cannot claim if the advance is in:

• the arts
• humanities
• social sciences, including economics

Further Information

To claim R&D reliefs, Generally Accepted Accounting Practice (GAAP) must treat your activities as R&D. Those activities should also qualify as R&D under the DSIT guidelines and tax law. When making R&D claims, some companies confuse the general meaning of R&D with what qualifies under the DSIT guidelines. HMRC also sees some common mistakes in identifying the beginning and end of an R&D project for tax purposes.

HMRC guidance suggests that before you begin an R&D claim you should:

• understand HMRC expectations of claimants
• identify who is a competent professional, able to judge if a project is seeking an advance in science or technology for the purposes of an R&D claim
• find out if your work qualifies as R&D for tax purposes
• understand the meaning of ‘scientific or technological advance’ for the purposes of R&D claims
• identify the scientific or technological uncertainty that the project is seeking to resolve
• decide where the project begins and ends for the purposes of an R&D claim
• understand the evidence of a qualifying project HMRC may expect to see if they check your claim

Penalties

Penalties can be levied by HMRC if it disagrees with an R&D tax credit claim.  The penalty depends on the ‘severity’ of the error. If an enquiry finds that you’ve completed your claim incorrectly deliberately, or without due care – penalties can be up to 100% of the tax payable.

We can help

If you are considering submitting an R&D claim please do get in touch with you Swindells advisor who will be able to advise you on the best course of action.