Effective record-keeping is a critical part of any research and development (R&D) tax credit claim. But many businesses, including The Hardware Group, have faced an initial struggle with HMRC’s open-ended guidance on what records are needed to support a claim.
We undertook a comprehensive record-enhancing project with Hardware. The project explored what records were kept, how data was captured and how it could be used within the R&D claim methodology.
As well as managing the full R&D claim, our expertise broadened the scope of Hardware’s qualifying activity and helped them mitigate the risk of an HMRC enquiry with better quality submissions.
Good record-keeping can dramatically improve an R&D tax credit claim. ForrestBrown helped this large IT solutions and services company by carrying out a comprehensive record-keeping project to help them apply best practices.
Hardware is a multi-vendor IT solutions and services company with offices in the UK and around the World. Over time they have grown from an equipment reseller into a company that designs bespoke IT solutions such as complex networks and data centres.
Clients include airports and universities. Hardware has strong relationships with many leading technology partners such as Dell, HP and Juniper Networks which mean they often feed into the development of new products.
ForrestBrown undertook a comprehensive record-keeping project with Hardware Group. Starting with a workshop we used the guidelines for research and development to educating senior management on its definition for tax purposes and the activities that contribute to R&D, both directly and indirectly.
We explored what records were kept, how data was captured and how it could be used within the R&D claim methodology. This involved working with each department head to see how they undertook R&D projects, what data they already kept and how they could adapt their existing processes and records to create a reliable and contemporaneous record-keeping system to support their claims.
For Hardware Group, the incentive has proved invaluable in enabling us to reinvest in our staff, as well as create new jobs geared towards developing more assets for the business and optimising systems. Stewart Holness Executive chairman, Hardware Group
In the case of Hardware, ForrestBrown also manages the full R&D claims process. The outcome of advice on record-keeping meant we were able to build a more robust methodology to calculate the value of the R&D tax credit. Going forwards, this implementation of best practices will support broader, and therefore more financially valuable, claims.
A welcome bonus from the workshop was that we identified a whole separate business unit – tucked away in a different location – that was carrying out R&D. On the face of it, it was a repair centre, but part of what they actually did was to carry out speculative research projects to come up with solutions that would extend the lifecycle of obsolete equipment for large telecoms clients.
Telecoms companies have vast stocks of electronic equipment that are no longer supported by the manufacturer – perhaps it is not cost-effective, or perhaps they have gone bust. Often, this equipment was never designed to last more than a few years, but the companies with the stock have come to need it to function for much longer periods. So Hardware design custom fixes and solutions to keep the portfolios operational. It is an invaluable service.
The example of how we worked with Hardware is an excellent demonstration of how ForrestBrown does so much more than just look at the numbers. We tailor our approach for larger companies to offer bespoke consultancy exactly as it’s needed.
One of the quirkier aspects of R&D tax credits is how open-ended the incentive is. HMRC’s definition of R&D for tax purposes, for instance, can be confusingly broad. Another slightly ambiguous example is record-keeping requirements.
The difference between a good research and development tax credit claim and a great one is quality record-keeping. But often what constitutes ‘quality record-keeping’ is hard to grasp — and HMRC’s guidance on the matter can seem beguiling.
In fact, HMRC does not set record-keeping requirements specifically for the purposes of claiming R&D tax credits. The logic is that the records kept by individual companies will vary.
That may seem frustrating at first, but the tax authority’s logic is actually sound. R&D tax credits encompass all manner of industries and businesses. A uniform requirement would potentially restrict the incentive’s impact.
So where does that leave businesses hoping to claim but bamboozled by what HMRC wants from them? HMRC does generally expect some evidence of R&D work to be demonstrated in the company’s records, after all.
R&D tax credits are a self-assessment regime. The onus is on the business and relevant stakeholders to correctly identify and track the relevant R&D. Faced with fairly open-ended definitions and requirements, that might seem scary — but it doesn’t have to be.
It’s here where specialist insight can really make a difference. Educating clients is a core part of how we ensure a successful, secure and maximised R&D tax credit claim.
An example of this is our work with The Hardware Group. We do so much more than just look at the numbers. We tailor our approach for larger companies to offer bespoke consultancy exactly as it’s needed.
Want to maximise your R&D claims through more effective record-keeping? Speak to ForrestBrown today.