Experts agree that the easiest way to file for R&D tax credits is to hire professionals to do it for you. But if you have some extra time on your hands and don’t mind the amount of work it would take, it is definitely feasible to do it on your own. There are three major steps you need to complete to file your R&D tax claim which are:
- Write a convincing technical narrative
- Put together a clear table of financial calculations
- Amend the CT600 and file it with HRMC
The essential point of filing is to convince HRMC that you have a clear understanding of what qualifies as R&D expenditure and that you’ve diligently applied these guidelines. If approved, your claim will be paid within two to eight weeks depending on their workload. Here are some additional tips on how to go about each step of the process.
How to write a technical narrative
The primary objective of writing a narrative is to come up with a document that presents the R&D activities of your company in a clear and coherent way. This will ensure that HRMC approves the claim without further inspections. You must get the right data from key individuals involved in the process. The information you gather should be detailed and specific. Some important pieces of information you should gather are: name of the project, the duration of the project, capabilities of the project, description of the design, the challenges faced with execution and production, and platforms and tools used.
The key to writing a narrative is to approach it from a technical, and not managerial viewpoint. The narrative should also be simple and be able to connect the technical data with the financial aspects of the project.
How to prepare financial calculations
The next step is to come up with financial calculations for costs that qualify for R&D tax credits. There are four categories defined by HRMC for costs that qualify:
- Direct labour. Employees that are directly on the payroll of the company who worked on the project.
- External staff. Outsourced staff but otherwise similar to employees of the company.
- Subcontracted R&D. This refers to parts of the project that have been completed by a subcontractor. There should be a corresponding contract or agreement.
- Materials and resources that have been consumed for the duration of the project.
While these may be the basic categories, it is important to keep in mind that HRMC has also defined exemptions to these expenses. You can check their website to find out exactly what costs are exempted.
The last step in the process is to amend the CT600 form and fill in the right boxes and file it with HRMC. There are other resources available online to guide you in filing for R&D tax credits successfully. Government websites are especially helpful along with online tax calculators. Should you need the assistance of an accountant or a tax professional, there is no shortage of services available out there to make filing easier and less tedious for you.
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