8 Steps to Complete the R&D Tax Credit Claim for SMEs
26 September 2023
The R&D SME scheme is a valuable resource that can significantly benefit small businesses engaged in research and development activities. However, understanding the claim process is crucial to ensuring that your company maximises its eligible tax credits and remains compliant with the guidelines set by HMRC. In this blog, we will demystify the claim process, providing an R&D tax credit claim template for SMEs, breaking it down into manageable steps, and offering insights that will help you successfully make a robust R&D claim for your SME.
The R&D SME incentive at a glance
R&D tax relief for SMEs is an unmissable opportunity to receive some financial sustenance for your efforts in engaging in scientific and technical discovery and experimentation. A successful claim results in the freeing up of funds that can be injected straight back into your business. The Government created this tax relief to reward technological innovation and economic growth across various industries around the UK. Let’s outline the claim process step-by-step for your SME using the said template.
1. Check if you’re eligible for the SME scheme
The first step to tick off is to determine your eligibility against the latest R&D guidelines. To start an R&D tax credit claim for an SME, you need to meet the following:
- You are a registered company that is subject to corporation tax
- You are engaged in technological innovation. This means your project carries out qualifying R&D activities that aim to achieve scientific or technological advancements and not just routine or minor improvements. R&D projects face technical uncertainties or challenges in nature, and these challenges can’t be easily resolved with already available solutions or knowledge.
- You have spent money on your R&D projects
- Your staff count is less than 500
- Either a turnover under €100m) or a balance sheet total under €86m
If you meet this eligibility, move on to the next step. If you don’t meet this exact eligibility, perhaps because your turnover and staff count are higher, you could be eligible for the RDEC scheme instead. You can speak to us for an analysis of your SME’s position.
2. Let HMRC know in advance you are preparing an R&D tax credit claim
You need to notify HMRC in advance about your intention to put forward an R&D claim. This is applicable if you’re claiming for the first time or the last claim you made was more than 3 years after the last date of the claim notification period. If you forget this step, HMRC may not accept your R&D claim.
Firstly, identify what tax year you are claiming in and then select a representative of your company or an agent acting on behalf of the company. You will need to provide the following information to let HMRC know about your upcoming claim:
- The Unique Taxpayer Reference (UTR) of the company. This must correspond with the one indicated in your Company Tax Return.
- Provide the details of the primary senior internal contact for R&D within the company, typically a company director. And the contact details of any agent involved in the claim.
- Indicate the start and end dates of the accounting period for which you are applying for tax relief or expenditure credit. This must align with the dates on your Company Tax Return.
- The period of account start and end dates.
- Offer a brief overview of the higher-level planned R&D activities. Essentially you need to describe how your project meets the definition of R&D. It doesn’t need to include evidence because you will go into more detail when you prepare the supporting documents.
3. Identify the qualifying R&D projects
In your R&D tax credit claim, you’ll need to demonstrate how your project aimed to make an advance in your industry, overcoming technological and scientific, whether successful or not. What you need to ask is whether a competent professional could already produce a solution. Essentially, was the answer already there, or was your project a true breakthrough, using trial and error and innovative thinking? The qualifying projects of our clients include new products, processes, services, solutions, and making improvements to existing ones using science and technology to streamline processes within construction, for example.
4. Calculate R&D qualifying costs
The purpose of the R&D tax credits incentive is to empower businesses in the UK, allowing them to move forward with their projects without being hindered by financial expenses. Reducing financial pressure enables them to accelerate their innovative efforts and expedite the search for solutions to uncertainties within their industries. You must identify qualifying costs, such as staff salaries/pensions, software purchases, materials and consumables, and contractors’ costs so that HMRC can analyse these and offer you the corresponding financial benefit.
5. Calculate the R&D tax credits
Now that all your eligible costs are identified, you can use our free R&D tax credit claim template for SMEs to calculate your total R&D tax credits, known as the ‘enhancement.’ This will differ based on whether you’re in profit or at a loss; our template will work this out for you and apply corporation tax liability considerations, based on the up-to-date SME R&D rates. In the UK, SMEs can claim a tax credit of up to 186% of the qualifying R&D expenditure. Alternatively, you can use our free R&D calculator for a swift estimated entitlement.
6. Prepare supporting documentation
Prepare the supporting documentation, including technical narrative information form, project summaries, and evidence of eligible R&D activities to substantiate your claim to HMRC. Include the additional information form. The required documentation encompasses a written exploration of your project. This report should contain transparency, summarising your project’s development. Here is where you express the difficulties or initial uncertainties faced and what resources you used as well the accomplishments you attained.
7. Prepare and submit your R&D tax credit claim
You should electronically submit your claim to HMRC along with your tax filing. Upon receiving the claim, HMRC initiates the processing phase. If any concerns arise during this stage, expert examiners transfer the claim for a comprehensive assessment, which could potentially initiate an investigation, requiring you to answer and provide further evidence.
8. The outcome
If HMRC approves your claim, they will grant you R&D tax credits either as a reduction in your company’s tax liability or as a cash payment if the credit surpasses your tax liability.
What is the R&D tax credit claim template for SMEs?
If you’re a small or medium-sized enterprise claiming R&D, it can be frustrating navigating your claim submission because HMRC doesn’t have a set format for supplying information. All claims need to be filed via a corporation tax return (CT600).
After completing over 2400 claims across all sectors, we’re no stranger to the complexities that can arise in claiming for R&D as the process differs whether you’re trading a profit or loss. Our team of R&D tax credit specialists has delicately developed an R&D tax credit claim template for SMEs to streamline the claim process. You can input your costs, simplify your R&D claim preparation, and speed up the claim process for your SMEs, provided you are eligible to receive R&D tax credits.
The benefits of using our R&D tax credit claim template for SMEs
We have designed the aforementioned template to streamline your claiming process by providing you with calculations at your fingertips, allowing you to identify and calculate your eligible costs without any doubts. But wait, there’s more to it:
- Everything is documented – If any enquiries from HMRC arise, you have everything in one place to understand where you obtained your figures.
- Automatic calculations – The template performs calculations automatically; you just need to add your figures in the designated fields, and it will provide you with an estimated amount that can be claimed back from HMRC.
- Makes instant alterations – The template allows you to modify your figures if anything is added mistakenly or if you have missed something.
- Aligned to latest rates – Our team has developed this template with the latest legislative changes in mind to prevent errors.
Visit the SME scheme to get your free template and find out your estimated R&D tax credits.
How to maximise the success of your R&D SME claim
To remove any complexity from the processes for claiming for R&D, working with a dedicated R&D tax specialist means we take leadership of your claim. Whatever industry you work in, you’ll have unprecedented access to our R&D knowledge and successful track record with HMRC so you can receive the benefit you deserve. Contact us and one of our experts will get in touch to assist you.