Your research and development (R&D) tax credit claim is filed via your Corporation Tax return (CT600). There is no standard format for supplying your supporting information. But HMRC do set out the type of information they would prefer to accompany an R&D tax credit claim. You should include a breakdown of the qualifying expenditure and a description of the R&D being claimed.
Once you have calculated your R&D tax credit benefit, you need to enter this onto your company tax return (CT600). These figures include the enhanced qualifying R&D expenditure and, if relevant, the amount of payable tax credit. What box you need to put it in depends on what version of the company tax return you are using.
In order to ensure your claim is processed efficiently, and to avoid HMRC requesting more information, you should provide supporting documentation with these figures. This may include:
- A breakdown of your R&D expenditure by category;
- A description of the methodology you have used to quantify and apportion eligible expenditure for the purposes of your R&D tax credit claim;
- A description of the R&D projects and activities carried out, how you have identified these and why they satisfy the R&D guidelines;
- What records you have relied upon to prepare the R&D tax credit claim and how you have used these to calculate your R&D expenditure.
Although it’s not a legal requirement, HMRC encourages companies to:
- Tell them why you consider your project(s) to be qualifying R&D; and
- Provide a summary of the costs incurred on the R&D and how the figures in your return were arrived at.
This documentation is your chance to demonstrate to HMRC that you have given due care and attention to preparing your claim. You can show consideration of, for example, the definition of R&D, the legislation governing qualifying expenditure, the impact of any grant funding or capitalisation of R&D expenditure.
What happens if you do not supply supporting information?
If you don’t include this information with your claim submission, HMRC may open an enquiry to ask these questions. They will be looking for reassurance that your claim preparation process is robust and that you have sufficient records to support your R&D projects and costs.
During an enquiry, HMRC may also provide advice and guidance on the sort of documentation that should be filed alongside future R&D tax credit claims.
At ForrestBrown, we have structured our claims documentation to best support HMRC’s needs. We regularly update this documentation to respond to feedback from HMRC, as well as changes in their practices with respect to how they review R&D tax credit claims. This process ensures that we provide all of the information in the clearest and most effective way each time a claim is filed. It gives you peace of mind that your claim is robust and defensible.