R&D tax credits accountant in Fulham

What counts as research and development

For tax purposes, R&D has a specific meaning. Your company must be trying to make an advance in science or technology, and the way to achieve it must not have been readily known or worked out by a competent professional in that field. In plain terms, there has to be a real technical problem that your team did not know how to solve at the start.

That can include software that does something new rather than something standard built in a new way, new materials or processes, or engineering that overcomes a known limitation. It does not cover work in the arts, social sciences or most business process changes. Building an ordinary website or app using well known tools, however hard the project felt, usually does not qualify.

How the current schemes work

For accounting periods starting on or after 1/4/2024, most companies claim under the merged R&D scheme. This replaced the old split between the small company scheme and the research and development expenditure credit for large companies. There is also enhanced support for R&D intensive small and medium sized companies that are making losses, where R&D spending is a large share of total costs.

The value of a claim depends on the scheme, whether the company is profitable and the rates in force for that period. We work out the figures from your own costs and explain how the relief reaches you, whether as a lower corporation tax bill or as a payable credit. We do not promise a figure before we have looked at the work.

Deadlines you must not miss

Some companies must tell HMRC in advance that they plan to claim. This applies to first time claimants, and to companies whose last claim was made more than 3 years before the end of the notification window. The claim notification must be sent within 6 months of the end of the period of account. If it is missed, the claim is invalid.

Every claim also needs an additional information form, sent to HMRC before the company tax return that contains the claim. It sets out the projects, the costs and the people involved. The claim itself is made in the company tax return, normally within 2 years of the end of the accounting period.

• Claim notification, where required: within 6 months of the period end
• Additional information form: before the CT600 claim is filed
• Claim in the CT600: normally within 2 years of the period end

Which costs can be included

Qualifying costs are usually staff costs for people directly working on the R&D, a share of the cost of subcontractors or agency workers, materials used up in the work, software and some data and cloud computing costs. Rules on overseas subcontractors and workers have tightened, so work done outside the UK may not count.

Rent, general overheads and the cost of a finished product do not count. Staff time has to be based on what people actually spent on qualifying work, not a rough guess, so timesheets or project records help a great deal.

What to have ready for a claim

Good records make a claim faster to prepare and much easier to defend. You do not need anything elaborate. Notes in a project management tool, commit messages, test results and short write ups of what failed and why are often the best evidence there is, because they were made at the time.

• A short description of each project and the technical problem
• Names and roles of everyone who worked on it
• An estimate of time each person spent on qualifying work
• Payroll reports for the period
• Invoices from subcontractors and agencies, with where the work was done
• Costs of materials, software and cloud services used

Why HMRC checks so many claims

HMRC has been concerned about weak and inflated claims, and it now checks a high number of them. Claims that describe ordinary product development in technical language, or include staff who were not involved, are the ones most likely to be challenged. A rejected claim can mean repaying the relief with interest and possibly penalties.

We would rather tell you honestly that a project does not qualify than prepare a claim that falls apart later. Where it does qualify, we write the technical narrative with your team in their own words, link every cost to a project and keep the working papers in case HMRC asks.

How we work with your team

We start with a short conversation with whoever leads the technical work, often a founder or a lead developer. Fulham, Hammersmith and White City have a good number of small software, health and engineering companies, and the questions are much the same in each: what did you try to do, what was uncertain, what did you try and what did you learn.

From there we gather payroll, subcontractor invoices and other costs, prepare the additional information form and the calculations, and include the claim in your corporation tax return. Fees are fixed and agreed before any work starts, after a free review of your projects. We do not charge a percentage of the relief.

Common questions