By its very definition, R&D work is on the cutting edge of the field in which it is conducted and is most likely subject to a Non-Disclosure Agreement (NDA).
It can be unnerving for clients less experienced in making an R&D tax relief claim to discuss the inner workings of their projects and provide information that, in the wrong hands, could help competitors claim an unfair advantage.
As an R&D tax consultant, we are adept at handling R&D tax relief claims with sensitivity and full confidentiality, so we want to highlight the ways that you can reassure your clients that their work is safe.
Why might NDAs pose a challenge for R&D tax relief claims?
There are two core parts of the R&D tax relief claim that could be challenging with NDAs – the technical narrative and any supporting evidence.
Supporting evidence, like the salaries earned by those involved in the R&D work, should be handled in the same way that other sensitive figures are.
It is important that only authorised individuals within the innovative business are shown the full spread of figures, with a censored version being used as standard for anyone else who may come across the R&D tax relief claim.
The figures can be shared with HM Revenue and Customs (HMRC) with little issue, as they are adept at handling confidential data without issue.
The technical narrative and any research-specific evidence become more challenging to handle in an R&D tax relief claim.
Remember that the technical narrative serves as a breakdown of the innovation and is intended to guide someone with little sector experience through the process of resolving a scientific or technological uncertainty.
In theory, a rival business could use a technical narrative to replicate the advance, which could be problematic if the breakthrough is not made public.
Generally speaking, most NDAs will not be negatively impacted by R&D work as R&D tax relief claims tend to focus on the company’s technology and not that of the end user.
The work done on a technological level may not violate an NDA as in some cases the company developing the novel system may be unaware of its full utility if they are working on behalf of a larger organisation such as the Ministry of Defence.
However, there are companies that do develop their own technology and are conscious of disclosing parts of the process to anyone.
In these cases, it is worth understanding ways to alleviate the concerns that clients may have regarding the ways that their sensitive information is being processed.
How can you make sure R&D tax relief claims do not breach NDAs?
It is worth keeping in mind that HMRC is legally bound to protect taxpayer information and will only disclose it in limited circumstances.
This means that you can emphasise to clients that controlled sharing under HMRC’s statutory confidentiality framework is a secure route to answering enquiry questions while preserving trade secrets.
If HMRC requests to see original, sensitive materials, then it should be possible to propose a controlled access arrangement rather than blanket refusal.
This will enable HMRC to have their questions answered without jeopardising the sensitive data of your client.
Ultimately, the responsibility to preserve NDAs falls on the accountants and R&D tax consultants who help to compile the R&D tax relief claim.
It is vital that you negotiate with your client to sign an NDA that allows for the acquisition and retention of data to allow for the creation of R&D tax relief claims, so that a complete claim can be submitted.
Technical narratives should be treated as highly sensitive documents, so the Additional Information Form (AIF) that reflects the narrative must only be shared with authorised individuals.
The unique nature of R&D tax relief claims means that the technical narrative is at least as confidential, if not more so, than the figures themselves.
However, it is possible to take the end application or product out of the narrative and simply focus on the underlying technology only, thus removing the risk of revealing too much information that could interact with NDAs.
We are on hand to help you understand the best ways to enable innovative businesses to make their R&D tax relief claims without jeopardising the work that they do.
