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FI Group has over 20 years of experience in R&D tax advice. Within those years, we have seen mistakes, and missed opportunities when it comes to R&D tax. However, with the help of an experienced specialist, these mistakes can be easily avoided.

1. Claiming R&D tax credits under the incorrect scheme

One of the most common mistakes companies make, when it comes to claiming R&D tax, is not claiming under the correct scheme, leaving companies having to repay back a large sum of money back to HMRC. 

There are two schemes to claim R&D tax claims:

  • Small to Medium-sized Enterprises (SME) tax relief scheme – for smaller to medium-sized companies, with tax relief available up to 33.35%.
  • R&D Expenditure Credit (RDEC) R&D tax relief scheme – for larger companies, with tax relief of 10.53%.

Other factors that need to be considered and determine the suitable scheme, such as grant funding, shareholders, subcontracted R&D projects and linked companies with an umbrella company. However, even if your company’s turnover is of an SME, you will still have to claim via the RDEC scheme if you have received access to state aid grant funding for your R&D project.

2. Lack of understanding of HMRC guidelines

The lack of understanding of HMRC guidelines is one of the most common mistakes people make when claiming R&D tax credits. Although it may not be possible for many to read and understand all the HMRC guidelines, we suggest that you take time to understand the basics of R&D tax claims before beginning the process. Having a brief understanding will help you on your journey of claiming tax credits and thus what you can claim for.
If you need any assistance or do not feel confident about your claim, you can consult one of our R&D tax credit experts here.

3. Claiming from ineligible costs and projects

Furthermore, many are confused as to what is classified under R&D tax credits, however, HMRC has a comprehensive guideline which we recommend reading, you can find it here. Projects seeking advancements within the science and technology domain are included in the term R&D. 

However, before making a claim, you should make sure that your project is eligible for an R&D tax claim. Many companies add on costs that they find out are not eligible, to maximise the claim, resulting in HMRC enquiry. Therefore, in order to successfully make an R&D tax claim, you must include eligible costs. This does not include prototypes that will be used in the future.

4. Not including costs of indirect activities that quality

The majority of companies miss out on claiming indirect activities that are still quality due to the lack of understanding of HMRC guidelines. The costs of R&D projects which are undertaken by indirect activities are eligible to claim. Companies often forget to include staff costs and therefore salary costs, which are in fact eligible and qualify for indirect activities, such as those in HR, IT and finance.

5. Assuming all technical projects qualify for the R&D tax claim

Many companies assure that all technical projects qualify for the claim (which is not the case) and find the eligibility criteria confusing. According to the HMRC guidelines, projects which qualify should be seeking advancements in technology. Just because a project involves technology, does not mean it qualifies for R&D tax claims.

We can help

If you want to make an R&D claim, a credit specialist can help you to let you know what qualifies and what does not, so you do not have to waste days in preparation for the claim, making the process much easier for you.
You can talk to our team here.

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