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For innovative businesses that find the time, energy, resources and manpower to tackle multiple projects at a time, there is a question about how these are ultimately represented in the R&D tax relief claim.
You may have noticed the project that holds a special place in your heart is relegated to a footnote in your eventual R&D tax relief claim and could be wondering why that happens.
It is worth understanding how projects are selected so that you know which ones you should be focusing on evidencing more for your next claim.
What are the rules for including multiple projects in an R&D tax relief claim?
Theoretically, there is no upper limit to the number of projects that could be captured in an R&D tax relief claim, provided they meet the criteria to count as R&D and were conducted in either of the previous two accounting periods.
The rules around including projects depend on the actual number of projects conducted by your business.
If you have done three or fewer projects, all of them need to be included in full as part of the R&D tax relief claim.
We will talk through the details of each, determining the extent of expenditure and the unique challenges and ambitions of each project.
When a business conducts between four and ten projects, it is time to be more selective in our approach.
An R&D tax relief claim will need to contain detailed information on at least three of the projects but must discuss enough projects to cover 50 per cent of the total qualifying R&D costs.
The competent professionals working on the projects will likely have a strong idea of which projects are likely to make up that 50 per cent, but our team will health-check the projects as we go along.
If we find that we have only captured 49 per cent or less of your costs, expect us to dig deeper on one of the remaining projects.
Should your business be truly ambitious and you have conducted more than ten projects, then it is time to put together a substantial R&D tax relief claim.
The ten largest projects will need to be addressed, so if you did 11 projects, then only one gets left out.
Those ten projects should cover at least 50 per cent of the total R&D costs, but more projects can be included until that figure is hit.
Even if 50 per cent of the costs are contained within a single project, ten must be written about.
How do projects get picked to be in an R&D tax relief claim?
As may be apparent, the amount spent on each project is the key.
While you may have achieved something as revolutionary as the wheel was to cavepeople, if there are projects that had more money put into them, then those will be the focus.
However, we do not blindly go on costs alone.
If there is a decision to be made between projects where the cost no longer becomes a factor, such as if either remaining project would hit the 50 per cent threshold, we will find the most innovative of them.
This will be based on our experience with HMRC and will be the project that is likely to be the easiest to represent in a way that will make the advance apparent.
While some projects may never see much love in an R&D tax relief claim, do not throw all the notes away.
Enquiries can target smaller projects for fear that invalid costs are being Trojan-horsed into a claim.
As you know, we defend our valid R&D tax relief claims, though this is much easier to do if you still have the evidence that innovative work was conducted.
In time, you may get a sense of which projects are worth the greater focus and how to maintain robust records of all the R&D work you have done in the qualifying period.
Our ongoing support ensures the full extent of your research is covered in an R&D tax relief claim, so get in touch 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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