R&D tax credits are more than just a tax relief; they’re a catalyst for innovation. For many companies, the financial relief these credits provide makes the difference between pursuing and shelving a new idea due to cost concerns. 

According to HMRC’s statistics, for the tax year 2021 to 2022, over 90,315 companies claimed R&D tax credits, amounting to £7.6bn in tax relief. This represents a significant investment in the future of UK businesses, helping to drive forward new technologies, products and services.

Let’s take a look at how to maximise your claim…

1. Keep detailed records

Accurate and comprehensive records are crucial for a successful R&D tax credit claim. This includes documenting project objectives, methodologies, time spent by staff and all related costs. The more detailed your records, the easier it will be to substantiate your claim and maximise the benefit.

2. Identify all qualifying activities

It’s easy to overlook certain activities that qualify as R&D. Beyond obvious R&D work, consider whether your company has been involved in process improvements, software development or even trials and testing that attempted to solve scientific or technological challenges. An experienced R&D tax adviser can help identify these activities.

3. Understand the scope of eligible costs

R&D tax credits cover a wide range of costs, not just direct R&D expenses. Qualifying costs can include:

• staff salaries, wages and other associated costs like employer NICs and pension contributions
• costs of materials and consumables used in R&D
• utilities like power and water which are used in R&D processes
• software costs directly related to R&D activities
• payments to subcontractors and external agencies, provided they relate to R&D (Note: For the accounting period starting 1 April 2024, the subcontractor needs to be based in the UK).

By thoroughly understanding the scope of eligible costs, you can ensure that your claim is as comprehensive as possible.

4. Work in ‘projects’

It is helpful to think of your R&D activities as distinct projects, each representing its own area of innovation. HMRC typically prefers claims to be split into projects, so keeping detailed records for each project throughout the year will help ensure a well-organised and comprehensive claim.

5. Review past claims

R&D tax credits can be claimed for previous years, typically up to two years from the end of the accounting period in which the R&D expenditure occurred. If your company has overlooked R&D tax credits in the past, it might be worth reviewing previous periods to see if there’s potential for a claim.

6. Work with a specialist adviser

While handling R&D tax credit claims internally is possible, working with a specialist adviser can significantly increase the likelihood of a successful and maximised claim. Advisers have the expertise to identify all qualifying activities and costs, and they can help navigate the intricacies of HMRC’s requirements.

If you’re unsure whether you could make a claim, before you consider maximising it, please get in touch; we’ve advised many businesses, supported successful claims over many years, and know specialists in the arena who can support more advanced submissions if necessary, so are both happy and able to help!

See related post: Common Misconceptions about R&D Tax Credits.