Our recent R&D roundtable for businesses investing in IT or software development, aimed to help identify which projects are eligible for R&D tax credits and how claims could be improved. Here we summarise the key learnings discussed during our event.

Discussions were led by our R&D Director, Iain Butler – who has advised a large number of small and multinational businesses on successfully claiming R&D tax relief. We were informed our guests wanted to learn more about the financial costs associated with submitting a claim and qualifying expenditure.

It is crucial to understand both areas when you consider submitting a claim, because both aspects can affect the eligibility assessment process.

Subcontracted R&D and externally provided workers (EPWs) - getting the costs right

You need to have a clear understanding around claiming for externally provided workers versus subcontractors, as this is the single largest area of potential fraud with R&D tax credit claims. By differentiating between the two, you can prevent submitting incorrect R&D claims and avoid a dreaded HMRC enquiry.

Customisation versus innovation – what is the advance in technology?

If you are a tech business, you probably spend substantial amounts of time and money on technology to improve your internal systems. By doing so, you may feel you are entitled to R&D tax credits. However, don’t forget to review whether you are including trivial customisation or actually challenging innovation in your claim, as there are different requirements to ensure your project will achieve an advance in technology.

Claiming for overseas costs – the UK versus rest of the world

What should you consider if you outsource your development work to overseas parties, and what requirements need to be fulfilled to make your claim valid? Your work must be managed by UK team members to be eligible to claim back these costs. Don’t forget that the proportion of these costs claimed is subject to your respective company structure and the relationship held with your overseas entities. However, after 1 of April 2024, the UK R&D scheme changes to become UK-focused.

Why not join us next time?

We regularly organise events that will give you confidence when it comes to support around R&D, so you can improve your claims application and use the credit gained to invest in the future. Click here for our round-up of HMRC’s new software guidelines.