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You might be hard at work on your magnum opus and the thought of condensing it to two accounting periods may be laughable.
We may have been working together for many years on this project or joined partway through to give you the support needed to keep going.
Either way, if your accounting period is coming to an end and the project is set to continue, you should know how we plan to handle this situation.
What is the challenge with a project that spans multiple R&D tax relief claims?
HMRC reviews your R&D tax relief claim as a standalone document, but it can be directed to previous claims where it is necessary to do so.
This means that we are able to keep each stage of your project represented in R&D tax relief claims, provided it continues to meet the criteria each time.
If you have worked with us on a longer project, you will have seen this in action, but some of our clients may only now be embarking on something more substantial.
We clearly ringfence costs incurred by the project to their correct accounting periods to ensure that the validity of the claim is not jeopardised by repeating costs.
The technical narrative will also reflect this, with references made to previous work serving to contextualise the current R&D.
Where you may need to pay particular attention is to establishing the state of knowledge for each R&D tax relief claim.
Why does the state of knowledge matter for a project across multiple claims?
Establishing the existing state of knowledge is a regular part of R&D tax relief claims and something we will work alongside you to complete.
The reason it matters for lengthier projects is that the plan of action may have been decided upon years prior to the claim being submitted.
HMRC needs to know whether anything has changed in the interim that could have affected the trajectory of the project.
As a competent professional, you will undoubtedly be keeping up with the existing state of science and technology throughout the work on the project.
Each R&D tax relief claim can serve as a checkpoint for the progress of your project, with you having a chance to reflect on how the state of knowledge has changed or remained the same since the work commenced.
If there is something that has affected your plans, such as another advance being made by someone else, this is where we can include it and use it to frame that year’s technical narrative.
If you are the only one making an advance in this specific area, then the existing state of knowledge is likely to be the same as the previous claim, but with the addition of whatever you achieved in that time.
We mentioned earlier the ability to show HMRC the connection to previous projects and this establishment of existing knowledge is a good place to do this.
Along with the more general discussion on the sector, we can briefly recap your previous claims to show where the project has got to and where you are picking up from.
It is worth remembering that HMRC are quite broad with its requirements for proving the existing state of knowledge, requiring only content that “might include any patent searches, reviews of the scientific or technological aspects of competitor products, and trade journal or scientific articles which indicate the state of knowledge and advancement in the particular sector, technology or trade.”
A valid R&D tax relief claim submitted on behalf of yourselves can count as this, given that HMRC will have acknowledged that the previous part of the project was valid R&D.
Knowing how to support you in the long-term is one of our core strengths.
We understand that R&D is not always a series of quick wins and that sometimes innovation takes time and patience.
Whether we are still working on your years-long project, one is about to begin, or you have done a smaller piece of R&D, we look forward to getting started on your next claim.For expert support across the entire lifespan of your R&D work, get in touch with our team today.
Adam Bointon is a Technical Director specialising in R&D Tax Credits for SMEs in manufacturing and software sectors. With over 15 years’ experience, he works closely with businesses to identify qualifying R&D activities and prepare clear, compliant claims. He combines technical expertise with a strong understanding of economics and finance to support successful outcomes. Adam also contributes to industry webinars and CPD sessions, sharing insights on R&D tax relief and HMRC requirements.
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