An optimised R&D tax credit claim relies on identifying all those projects that qualify – it doesn’t mean throwing in the kitchen sink just to make the numbers look good.
So, where should you be cautious when compiling your claim?
Was this real R&D? Was the work seeking an advance in science or technology and, if so, in what fields of science or technology?
Simply developing a new iPhone app might seem innovative but if it uses standard software technology and the only innovation is the web site it links to, or the commercial operation it carries out, it probably won’t be R&D.
You should be able to state clearly the field of science or technology in which you were seeking an advance… rather than just identifying a new functionality.
Ask yourself this…
Was this work new to the field or did it involve a catch-up to what others were already doing successfully? If you’re new to a field it may be results are not necessarily widely disseminated.
You need to be sure that a competent professional in that field would not already be expected to know how to achieve the result you seek.
R&D does not include re-inventing the wheel just because you did not know it was out there!
Another area that can cause confusion is the whether the work was technology research or market research?
Suppose your work consisted of reviewing the products on the market to see if they provided a ready-made solution. This might be researching the market, but it is not qualifying R&D.
Similarly, trawling your customer base to find out what developments they would want and might buy is not qualifying R&D. Nor is establishing whether customers like a new product you’ve developed.
This is not R&D testing… Unless there is a technological issue that needs to be determined by the customer testing.
Also ask yourself – or at least make sure suitably qualified colleagues ask themselves – whether your project is a design one rather than one requiring the resolution of scientific and technological uncertainties? Inevitably, and is so often the case one question then raises others. Part of the project could just be down to aesthetics or image.
You might be buying in a new product from a subcontractor to a set specification. There again, you may be subcontracting R&D to them.
If you are just employing a specialist to provide you with a new product you need to be sure, before you claim, that this is a subcontract of R&D and that it’s not just purchasing a suitable product from an expert provider who already knows how to produce it.
Considering many advisors expect their clients to identify the qualifying projects when they have little or no knowledge or understanding of the rule book, it is hardly surprising that a significant number of claims would not stand up to detailed scrutiny by HMRC.
Interpreting the complicated BIS rule base for R&D claims is a real skill – it’s where an advisor can be very helpful, correctly identifying the qualifying R&D projects, and their limits.
To ensure that we don’t overlook any qualifying projects, MSC R&D’s team of technical and financial experts drive the process – we ask our clients what ‘work’ they do first and then we drill down and establish exactly where the qualifying R&D is, leaving no stone unturned in our search.
This way we get the optimum results for our R&D Tax Credit clients.