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What records do I need to keep for an R&D tax credit claim?

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There is no fixed record-keeping system for a research and development (R&D) tax credit claim. HMRC accept that first-time claimants are unlikely to have detailed contemporaneous records to support all their R&D work. As such, you are not prevented from claiming if you have no specific records of R&D time. But some documentary evidence and prudent judgements will be necessary. Repeat claimers are expected to keep appropriate records.

As it’s the nature of R&D work that it is carried out systematically, HMRC generally expect some evidence of R&D work to be demonstrated in your company’s records: some form of planning material, for example.

HMRC do not, however, have set record-keeping requirements specifically for the purposes of claiming R&D tax credits. They understand that the records kept by individual companies will vary.

Are you claiming R&D tax credits for the first time? Find out how ForrestBrown will work with you.

What is good record-keeping practice for R&D tax credits?

For a number of years, HMRC have encouraged larger companies and regular claimants to consider keeping more contemporaneous records.

But HMRC do not expect all claimants to implement exhaustive record-keeping processes if there was no business requirement for them at the time. Timesheet systems are often perceived to be the preferred record-keeping system for R&D claims. But these may not always be the most appropriate method. The key is to implement an appropriate real-time approach to identifying R&D projects and costs – in whatever form best suits your business.

The definition of an R&D project is forward-looking as opposed to retrospective: R&D takes place when a project ‘seeks to achieve an advance’. So once you know that you are carrying out R&D, you can implement reasonable record-keeping measures for future claims.

Good record-keeping processes are important – but the extent and exact form of record-keeping will naturally be different for every business. For example, a software company may already have a timesheet system in place for client projects – this can be used to record R&D activity.

ForrestBrown can advise on the record-keeping process based on your business and its R&D work. The relationships we have with our clients include year-round support for all aspects of your R&D work – we are here to help.

COVID 19 and R&D tax credits

We can advise your business on what records you need to keep if you are making use of R&D tax credits with government support such as the Coronavirus Business Interruption Loan Scheme (CBILS), Bounce Back Loans and Future Fund.

A ForrestBrown R&D record-keeping project in action

We recognised the value in ForrestBrown educating our management on the tax definition of R&D, and best practice record-keeping to support our claims. As well as broadening the scope of our claims, it helps us manage the risk of an HMRC enquiry with better quality submissions. The results speak for themselves, and we expect to benefit for years to come

Have a question for our team?

It can be complicated to submit an R&D tax credit claim to HMRC’s exacting standards.

Get in touch with our team of chartered tax advisers, chartered accountants, lawyers, sector specialists, former HMRC inspectors and quality assurance experts to access expert guidance for your claims.

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