HMRC launches eligibility tool for R&D tax relief
Jacob Grattage, Reporter, Business & Accountancy Daily
In a bid to reduce errors and simplify applications for R&D tax credits, businesses can now check eligibility on an HMRC tool before submitting a claim
The tool is designed to help businesses gauge whether their project meets the criteria to qualify as research and development (R&D) for tax purposes before they submit a claim.
It is similar to the IR35 CEST tool with a selection of questions which need to be answered to assess eligibility of the research work, but the depth of information required is fairly detailed.
HMRC stressed that a ‘competent professional’ would have to provide some of the more detailed information.
It is aimed at first time claimants, businesses with limited experience in R&D tax relief, companies with limited experience or knowledge of the tax relief or anyone unsure whether their project qualifies or needs additional support.
The checker tool is not mandatory, although HMRC said it ‘does strongly encourage its use’. It is important to note that using the tool does not entirely guarantee the claim will be accepted, although it is a ‘good indicator’.
The tool is not really designed for novices, as HMRC requires that a ‘competent professional’ is available to help with questions. They define this as someone who is suitably qualified or experienced in the field of science or technology to which the R&D project relates.
HMRC describes a competent professional as ‘someone suitably qualified or experienced in the field of science or technology to which the R&D project relates. Usually this is someone directly involved in the project with professional expertise relevant to the advance being sought’.
According to HMRC, the average time to complete the eligibility claim is about 10 minutes.
The tool is split into three sections.
Section one asks if there has been any project work undertaken to date, if the project has a name or reference, and if the project involved work towards trying to solve a scientific or technological problem.
Section two and three ask for a competent professional to answer or to help answer the questions.
Section two ask if the professional’s experience is directly relevant to the project, if they know what the baseline level of knowledge was at the time the project started and if they can identify work seeking an advance in overall knowledge or capability.
Section three asks if the advance in overall knowledge and capability the project is trying to achieve can be identified, and whether there was any scientific or technological uncertainty during the project, if so what work was done to resolve the this, and if this work has completed, did it resolve the issue.
If at any time an answer given indicates that a project is ineligible, the questionnaire will pause, and a reason will be given explaining ineligibility. Answers can be edited at any time.
After the questionnaire has been completed, the eligibility results will be shown on screen.
These results will either be a yes stating: ‘The (project name) includes qualifying R&D for tax purposes.’
Or if it does not qualify, the results page will show different messages explaining why. This can include not having a competent professional on hand or not providing enough information to claim the relief.
The tool will then prompt users to preview, save and print the results, HMRC recommends that businesses keep a record of their answers, as they may need to confirm the information at a later stage.
The tool does not cover all qualifying conditions. Other requirements such as eligible costs and correct scheme selection will still need to be met to make a valid claim.
Businesses are asked to check if their costs qualify for R&D for tax purposes using guidance published by HMRC.
HMRC R&D tax relief checking tool
