Over the years, Square Finance has worked with companies of all sizes and domains, which provided us with an opportunity to prepare and review thousands of claims. Being R&D tax credits experts, we have come across all kinds of erroneous claims, and most of these mistakes are made due to a lack of information or expertise. However, with the help of experienced R and D tax consultants, you can easily avoid these mistakes. Using our experience and insights, we have created a list of the most common errors people make while preparing their R and D claims. If you want to prepare your R and D claim, this blog will help you avoid these errors in your claim.
1. Lack of Complete Understanding of HMRC Guidelines
Most of the mistakes we find in R and D claims are due to a lack of understanding of HMRC guidelines. We understand that CIRD guidelines are complex and confusing at times, which leads to issues like the inclusion of ineligible costs and claiming for activities that do not qualify and can even result in enquiry or reduction of incentives by HMRC.
It’s not possible for everyone to read all the detailed guidelines; still, we would suggest that you should at least take out some time to understand the basic criterion of R and D claims before starting the preparation of your R&D tax relief claim. This will help you know what you can claim for. If you still have any queries or you don’t feel confident about your claim, consult R&D tax credits experts. R&D tax credits experts have experience in preparing claims, and they will review your claim and ensure it is completely according to the requirements.
2. Claiming for Ineligible Projects and Costs
HMRC provides comprehensive guidelines for R and D claims, still, many people have confusion regarding what is classified under R&D. R&D is a broad term including projects of all the domains which are seeking advancement in science and technology. But before making a claim, you should ensure your project’s eligibility and make sure that your R and D claim should include eligible projects only. While trying to maximise their claim, companies often add costs that do not qualify for the claim and result in HMRC enquiry. For example, if prototypes used for R&D project testing are sold later on, they cannot be considered as eligible R&D costs. To successfully make an R and D claim, include eligible costs for the claim.
3. Not Including Cost of Qualifying Indirect Activities in
Many companies are unaware that HMRC allows companies to claim for qualifying indirect activities. We have witnessed many claims without staff costs of qualifying indirect activities even though they have staff working in finance, HR, and IT and their salary costs qualify for the claim. One thing which should be clear is that you can claim for the cost of indirect activities which are undertaken for R&D projects.
4. Claiming Under Incorrect Scheme
One of the common mistakes most companies do is making R and D claims under the wrong scheme. You can claim R&D tax relief via two schemes: SME R&D tax relief scheme and RDEC R&D tax relief scheme. The SME scheme is for small and medium-sized companies, while the RDEC scheme is for larger companies. Many other factors like shareholders, grant funding, subcontracted R&D projects, a linked company with a larger umbrella company etc., determine the suitable scheme for your claim. As notified, state aid like grants funding for the R&D project restricts access to SME, so even if your company size and turnover falls under SME, you still have to claim via the RDEC scheme.
5. Assuming All Technical Projects Qualify For The Claim
Companies often find eligibility criteria of R and D claims unclear and assume that all technical projects qualify for the claim, which is not true. The project should be seeking advancement in technology according to HMRC guidelines. Any project just because it involves technology cannot qualify for R and D claims. Suppose you install a new case relationship management CRM system, which is not seeking any advancement and not solving any uncertainty during the project. In that case, it will not qualify for the claim.
If you want to make an R and D claim, contact R&D tax credits experts of Square Finance, who have simplified and streamlined the process, so you don’t have to waste days for the preparation of the claim. We have in-depth knowledge of R and D claims, and we know how to tailor maximised and optimised claims. So contact us and get you R&D incentives within a few days.