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What’s in an R&D tax report?

A breakdown of how to write a report like a specialist


So you’ve done your research into R&D tax credits; you have a rough idea about eligibility, qualifying costs and that you need to submit a report to HMRC to claim these back. But what do you actually put into the report?


If you go onto HMRC’s website, there is a link to an online service for sending details to support your R&D tax relief claim. To use this you’ll need a Government Gateway user ID and password, as well as having submitted your full Company Tax Return form (CT600) for the accounting period you would like to claim for.


The website also provides some information on the details you’ll need to support your claim. This should comprise of a short summary that explains how your project(s) looked for an advance in science or technology and aimed to achieve this, had to overcome uncertainty, overcame this uncertainty and could not easily be worked out by a professional in the field.


Additional information includes the start and end dates of your R&D project(s), your ten-digit company unique tax reference (UTR) number, the total amount of tax relief you’re claiming, a breakdown of your qualifying R&D costs and your unrelieved trading loss for the claim period.


Certainly, if I was in your position, based off HMRC’s guide, I still wouldn’t know how to go about writing this.


I’d imagine everyone has their own unique way of writing their report, as long as it includes all the information that HMRC require. The objective here is to avoid an enquiry and have your claim approved first time round, leaving the case handler with no doubts about your qualification and the tax relief you are claiming.


Having written countless successful reports, here’s a breakdown of our style:


1. Purpose

Like any good report, an introduction is necessary. This section provides a brief summary of the purpose of the report. The report is generally broken down into two sections: (a) a narrative relating to the R&D activities of the company in relation to HMRC’s definition of research and development, and (b) a summary of the eligible R&D costs the company has incurred as a result of the project(s).


2. Entitlement to claim R&D tax relief

This section entails a summary of which relief the company is claiming for and evidence supporting their eligibility. This could be written vis-à-vis the criteria outlined in the Corporation Tax Act.


3. Company overview

A very brief overview of the company, which sector it operates in, the innovative activities the company is undertaking, and what the R&D project(s) has or aims to result in.


4. Key Personnel and competent professionals

One of HMRC’s requirements is that the advance your project(s) seeks could not have easily been worked out by a professional in the field. One of the ways you can show this is that the people working on your project(s) are professionals in the field and get them to explain the uncertainties involved. Therefore, if you have any professionals who worked on your project(s), it’s a good idea to include them and their experience.


5. Overview/History & context of the R&D project

How you write this section will be based on the circumstances of your R&D project(s). If this is the first time you are claiming R&D tax credits, an overview of what the project(s) entailed and set out to do, with perhaps a timeline and breakdown of qualifying activities is most suitable. You would also use this if you were describing multiple projects.

As R&D tax claims are made on a yearly basis according to your accounting period, you could find that the project(s) you wish to claim for is a continuation of a previous one. In this case, a history and context can help the flow of your report.


6. Scientific or technological advance

This is perhaps the most important part of the report. After reading up on HMRC’s definition and criteria for scientific or technological advance, you need to, in technical terms, explain the advance you sought. If you remember, R&D is the creation or modification/improvement of products, processes, or services. So, in terms of your project(s), explain this clearly. You could structure it as a story: what was the problem, what were the benefits of overcoming this, how you were unable to find this easily, and how to set about reaching a solution.


7. Scientific or technological uncertainty

This section details all the unknown before you set about the R&D project(s). Again, in technical terms, explain where the uncertainty stemmed from and why an effective solution was not deducible at the start. This is also where you would include any research of contemporary knowledge and capability that may have taken place, and how the competent professionals you mentioned earlier in the report could not easily work out the advance.


8. The qualifying R&D activity

This section, once again in technical terms, details the R&D process: the planning, approach, and steps taken during the R&D project(s). You may also want to briefly describe the result of each stage and justify the qualification of R&D activities in relation to the R&D guideline.


9. Expenditure summary for qualifying project(s)

HMRC list qualifying costs that companies are eligible to claim on their website, further detailed in the R&D guidelines. In this section, we like to include a breakdown of the costs in a table format clearly indicating where the costs have been incurred using HMRC’s terminology. This provides a succinct summary and grand total of claimable costs associated with the R&D project(s). Heed caution with which costs you include – for example, you can only claim up to 65% of subcontractor costs.


On average, a report is usually between 5-10 pages. Where you need to pay attention, and a specialist excels in, is the language used in the report – a key theme being ‘technical terms’. Often using the wrong terminology or describing ‘what’ has been developed rather than ‘how’ functionality has been achieved can leave gaps in the report, resulting in enquiries.


Had a go and want us to look over your report before you submit? We’re happy to do this for you, at no cost. Just email it over to us at info@novustax.co.uk.

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