Almost all the R&D Tax Credit financial claims handled by Swift R&D are accompanied by a technical evidence report. But why? Some companies who have in the past submitted R&D Tax claims through their Accountants have received the financial benefit without any supporting evidence, suggesting that the report is not necessary or a waste of effort. In this blog entry, we’ll explain why the report is not only necessary, but why it can be a valuable asset for your business.
Let’s start by explaining what a technical evidence report is, before explaining why it’s necessary.
The report is sent to HMRC and simply presents an overview of the financial claim being made and then presents a technical justification for this claim. This is done by detailing specific eligible R&D projects/sub-projects that were completed during the claim period and explaining why they’re eligible for inclusion in the claim. It’s compiled through you or your technical staff entering information about your projects via the Swift R&D Portal and thoroughly reviewed by one of our Consultants. The report length, level of detail required, and amount of time required of your technical staff generally corresponds to the size of the financial claim being made.
Over our 9 years’ experience in submitting R&D Tax Credit claims for our clients at TBAT, we’ve learned a lot about what constitutes a robust, well evidenced and maximised R&D Tax Credits claim – and have implemented this into the Swift R&D process. The report element is an essential part of this because:
We’re not Accountants – Well, some of us are, but most of us aren’t! Our Consultants are engineers and scientists who take a real interest in your R&D, but we’re also experts in R&D Tax legislation. Our experience means that, unlike the majority of Accountants (through no fault of their own!), we’re uniquely placed to qualify your R&D expenditure in granular detail where required and help you to submit an elevated, but most importantly, well evidenced claim. This is where the report comes in. If you submit a wholly justified but ‘elevated’ financial claim, you need to back it up with some evidence to stop ‘alarm bells’ from ringing at HMRC.
HMRC can re-assess historic R&D Tax Credit claims – Relating to the above alarm bells, it’s not unusual for HRMC to accept R&D Tax Claims and return tax owed without any supporting evidence. Due to the ever-increasing number of claims and limited staff resources, they cannot scrutinise every claim. Instead, several metrics regarding the make up of your claim, the finances of the businesses and the nature of the industry are assessed, and claims are processed so long as everything looks reasonable.
So, you have your money! Great! But…
As with all tax affairs, HMRC reserve the right to re-assess returns for up to seven years after a claim has been made. If no evidence of your R&D is present, there’s a much higher chance that some or all of your claim could be invalidated and recovered by HMRC. Imagine trying to have to pull significant amounts of evidence of your R&D together after several years have passed! Staff may have left, data may have been lost and if you’re anything like me, I can’t remember what happened last weekend, let alone 6 years back! Even if you could pull together evidence, that’s a significant amount of unexpected work to complete, usually to a strict deadline! It therefore makes much more sense to produce a report in the here and now, that will sit on file in the event of any future review and potentially remove the need for further investigation. In summary, like an insurance policy, the report’s there so that if the worst happens, you’re covered!
It’s a great asset! – If you’re trying to access funding for your business, or you’re looking to sell; a well presented technical report which details the R&D undertaken, the achievements of your staff and both the retained IP and intangible assets within the business can be highly valuable.
So, there you have it – Why a thorough technical evidence report is essential to support a robust R&D Tax Credits claim.
Swift R&D’s process is specially designed to help you to build robust and optimised reports to be submitted to HMRC – find out more about our process here.