What do HMRC expect from R&D tax relief claimants?
In October 2023 HMRC published guidance (GfC3) on the process it expects claimants to follow when preparing a claim for R&D tax relief. Much of this guidance is the same as that found in the CIRD. However, the GfC3 also contains details about the steps HMRC expects claimants to have taken when assessing their projects which is not contained elsewhere. We've reproduced this advice here:
Before you make a claim for R&D tax relief, HMRC expect you to have taken the following steps.
A competent professional, or competent professionals, in the relevant field of science or technology should:
- identify projects that sought to create new knowledge or capability
- confirm that these projects relate to a qualifying field of science or technology, briefly explaining how each project is a part of the identified field
- name the exact uncertainties the projects were seeking to resolve
- explain why the answer to each uncertainty was not readily deducible
- briefly set out both:
- the state of relevant knowledge or capability in the field
- why resolving these uncertainties would represent an advance in the the overall knowledge or capability of the field at the time the work was undertaken
- identify exactly where each uncertainty began and would end
- briefly explain how the approach to resolving each uncertainty or group of uncertainties was a project or sub-project
- set out the plan for resolving each uncertainty or group of uncertainties
- set out the steps your projects took to resolve each uncertainty, from the beginning of the qualifying project to either:
- the end of the accounting period
- the date the project ended if that is earlier
The company or its agent should then, supported by a competent professional as needed:
- identify the activities that directly contributed to resolving each uncertainty as part of each project to advance a qualifying field of science or technology
- identify qualifying indirect activities that were part of the project and are listed in paragraph 31 of the DSIT guidelines
- identify the qualifying costs of the qualifying activities from its records,
- check if any of the costs of qualifying activities are restricted or disallowed by GAAP, the DSIT guidelines or tax law
The facts of an R&D claim always remain the company’s responsibility, even with professional advisers involved. Only the business fully understands the work undertaken. Keeping a record to show you or your agent have followed the 13 steps and you are satisfied the results are correct will help your company reduce the risk from incorrect claims.
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