R&D has become much talked about among SME's - companies 'specialising' in preparing R&D claims for HMRC have sprung up everywhere but should you be claiming and, if so, should you be engaging one of these companies to help you?

The current R&D tax credit for SME's is very attractive. With tax relief claimable on an additional 130% of money spent on R&D it is tempting for company owners to try and take advantage of this scheme. But, what are the pitfalls? There are three main things to watch for when compiling a claim: the first is that the R&D must address some technological challenge and/or have a significant degree of technical uncertainty surrounding its outcome - in short you have to actually be doing real R&D and not just learning. The second is that you must be incurring the cost of the R&D at your risk - any work funded by a client cannot be treated as R&D by you (but may be by them!). Thirdly, you need to link the allowable costs carefully and accurately to each project and be able to demonstrate that the cost was specific (or apportioned correctly) to each project. If you can do these three things then you have the basis for a claim. The rules around which costs can be included and which should be excluded are widely available and there are no shortage of people able to offer professional advice; but, despite what they say they are unlikely to understand your business better than you so it is worth you giving some thought to these three key factors before embarking on a claim.
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Published On: 08/04/2015