23 June 2022
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R&D Tax Credits are offered by the government for research and development projects to help fund innovative businesses in the UK. However, for small to medium enterprises (SMEs), the claiming process can be complex and overwhelming.

There are two parts for SMEs to include when claiming R&D Tax credits:

  • Accounting for costs
  • Creating a technical narrative of high quality

Part One: The Accountancy

This is where only figures and data are of concern. This is to give evidence to HMRC on what is being spent on the R&D projects. Further, how it is meeting the HMRC criteria. 

Part Two: The Demonstration

This is the tricky part. Here businesses have to show HMRC that the project completed can be classified and defined as an R&D project. It is important to highlight, that due to the huge amount of applications sent to the HMRC, the report has to have the right language and explain the technology quickly and be easy to understand and concise with factual statements.

However, avoid complicated jargon. The person reading your report, may not fully understand scientific and technical jargon. Here you also want to avoid commercial, marking issues and staffing. Moreover, link everything back to the costs you’ve linked in your CT600. This will show HMRC how 

The technical report is made to describe why the project was created. It also helps HMRC to see if the claim was made using the correct scheme (SME or RDEC).

  • The technological or scientific problem it aimed to solve
  • How the projects meet the HMRC’s legislation

When the costs and eligible projects have been identified, the writing can begin.

A competent technical report will contain information about:

  • what technological or scientific advancements were made. If your project failed, here is where you talk about the attempt.
  • the specific work that was undergone to address the technological or scientific uncertainties
  • staff (contracted, internal, outsourced staff) in terms of what roles were played in the project and their competency levels
  • the technological and scientific challenges, and how the R&D project provided qualification and work experience to professionals in the field. 

The importance of getting the technical report right

The technical report shows HMRC that the R&D project your business has undergone meets the criteria. Additionally, it is a chance for you to fully explain the work of the project, as well as why you believe the claim should be approved.

A poor or inaccurate technical report can lead your company to miss out on thousands of pounds if it is inaccurate, done to poor quality or shows inconsistencies. This may lead HMRC to want to look further into the company’s tax affairs.

It is important to note that even though you may have been awarded a relief, HMRC may re-assess the return, and have the right to do so up to seven years after which the claim was made. They may do this if they believe there are inconsistencies with either other aspects of the company’s tax landscape or from the claim itself. They may even wish to perform random checks in which they give very little notice for doing so. This may start new issues as Staff may have let the company and many may not have the necessary information required to tackle the issue.

However, with the support of an R&D specialist helping you with your technical report and being by your side, making sure it is all done correctly, your vision can continue whilst you are eligible for tax relief.

Case Study

One of our client’s projects aimed to test the feasibility of a trailblazer energy trading system which was for local energy economies. It aimed to be a cost-effective demand response solution to securing an efficient energy supply.

For the project to be successful, the company made sure the design and build of the user interface were followed up with a working mobile and desktop web application.

However, one of our clients faced technical uncertainties in their projects. The challenges caused professionals to face the complexity of controlling and managing the excess generated electricity during the day. Causing the professionals to realise that there was a significant excess amount of electricity being generated. Therefore, they had to develop a dubbed grid balancing method, which would allow them to control the generated energy in an efficient manner. 

FI Group helped to identify the eligible projects and costs associated with the project – making sure it was in alignment with HMRC CIRD Manual.

To read more about our Case Studies, click here.

Do you feel overwhelmed by it all?

If you feel overwhelmed by the process of a technical report and would like more clarity or support. Please feel free to contact us and we will help you with your technical report in a way that meets HMRC’s criteria and most importantly, increases the chance of you optimising your claim.

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