Preparing an R&D tax relief claim today looks very different to just a few years ago, and it is understandable that many accountants are feeling disillusioned by the changes.
Understanding the most common sticking points and tackling them head-on can help accountants and innovative businesses to make the most of R&D tax relief.
As R&D tax consultants, we want to guide you through some of the challenges faced and ways to resolve them.
Notification missteps and lost claims
One of the most frequent issues arises before a claim is even filed.
Businesses are missing out on relief simply because the notification requirement is overlooked.
It is essential to build a procedural checkpoint into your workflow to confirm the client has met the notification deadline.
Treat this as a non-negotiable step in the claim preparation process, as without it, even a technically sound claim can be ruled out.
Earlier in the year, we put out a blog detailing the key components of the Advanced Notification Form, so be sure to give that a read for more information.
Rising preparation time and training needs
Claim preparation is taking longer than it used to.
The volume of detail required under the merged scheme, particularly in the technical narrative, means accountants must dedicate more time to gathering evidence and liaising with clients.
This has made ongoing training and updates to internal processes unavoidable.
Firms that invest in understanding the process or seeking support from an R&D tax consultant can better absorb the increased workload without margin erosion.
Challenges with the Additional Information Form
The Additional Information Form (AIF) has become a key point of focus for HMRC, and it must be completed accurately to reduce the risk of enquiries.
The narrative sections in particular must clearly articulate the uncertainty faced, the advance pursued, and the lessons learned.
A best practice approach is to treat the AIF as a live document throughout the year, updated in tandem with project logs, rather than a form filled in under time pressure at year-end.
Contracted-out R&D: clarifying who claims
Uncertainty persists when R&D is contracted out.
The merged scheme rules mean the right to claim rests on whether the claimant bore the financial risk and had identified that R&D was required.
That needs to be documented in intercompany or client-contractor agreements before the work begins.
Accountants should ensure contracts make explicit who is expected to claim the relief, avoiding disputes or double claims later.
Enquiries on the rise
HMRC’s scrutiny of R&D claims is intensifying.
More claims are being challenged, and many of the enquiries centre on preventable issues such as a lack of contemporaneous evidence, poorly drafted narratives, or costs that cannot be reconciled to payroll or invoices.
A pre-submission health check that tests for issues can be a vital way to avoid red flags that will increase the chance of an enquiry.
Before the end of the year, there is likely to be a clarification of some of the guidance for R&D tax relief claims.
This should alleviate some of the struggles faced by accountants and innovative businesses that sometimes find it challenging to understand what can be considered R&D.
We will keep you updated on all new changes and support you in assisting clients with R&D tax relief claims.
