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News update for accountancy Firms and companies claiming R&D Tax Credits

Date: 4th May 2016

New Template on supporting narrative and date requested with claims.

HMRC have now introduced a new Template covering the supporting narrative and data they want to see with R&D Tax Credit claims. This includes the following information (and more) for R&D work carried out in the relevant accounting period for each project:

• Explanation of advances in knowledge or capability in science or technology sought.

• Description of scientific or technological uncertainties encountered in seeking those advances.

• Description of what work was carried out to resolve those advances.

• Dates when each project started and finished.

• Qualifying costs for each project.

• Short bios on R&D key leaders.

We have been asked to help in a number of situations where formal enquiries have been started after three or more years of R&D Claims being made. These were situations where we had been asked to help out by accountancy firms but where we had not been involved in the original claims. Where errors are discovered in those claims, HMRC will often want to see that these have not occurred in claims for previous years and where they have they will want these corrected, (they can go back up to six years) and they are entitled to impose financial penalties where errors are in the wrong direction – as well as having the benefit repaid.

In our view it is highly risky for companies to make R&D claims without thorough analysis of qualifying costs, scoping where R&D begins and ends, providing the correct supporting narrative and data to HMRC, and we strongly advise accountancy firms to advise clients of the risks. We talk with many accountancy firms that are helping clients to make regular R&D Tax Credit claims on behalf of clients where little or no supporting narrative or data is supplied. We believe that the new template is aimed at addressing this situation.

Terry Toms

Managing Director, RandDTax

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