The Role of HMRC in R&D Tax Relief Claims

The Role of HMRC in R&D Tax Relief Claims

Overview

HMRC administer the UK R&D Tax Credit system. Claims are submitted through the companies Tax Return and optionally (unless specifically requested by HMRC) the company will send an accompanying report to explain various important aspects of the R&D claim.
It may be that your claim is reviewed by a general tax advisor. In light of a number of potential risk factors, it may be that your claim is agreed and signed off at that point. Alternatively, it may be that the inspector wants to run the claim details via an R&D expert. Should this be the case then a specialist team will take a review and (if necessary) get back in touch with specific questions. As one further step, it may be that the HMRC R&D specialists may want to involve industry specialists from the field of science or technology, for example, CDIO who are experts in software development - this will help HMRC to really understand your claim and (if necessary) get back to you with any other specific details that would be required to resolve your claim.

CDIO

Software development R&D Tax Credits claims have been seeing a significant rise over the last few years. This, combined with the complexity of understanding software technical details (for none software specialists) has led to HMRC referring claims to their CDIO team.
The CDIO team are a mix of software architects and developers, who understand the ins and outs of the R&D Tax Relief Eligibility Criteria. They are nothing to worry about for genuine R&D claims - as they are trying to ensure that everything is in order.

Things HMRC like to see to Support your Claim

  • Clear and concise articulation of the technological (or scientific) Advance and Uncertainty. Not the functional Advance and Uncertainty
  • Concise descriptions, that don't contain unnecessary jargon
  • An explanation of why the something is a technological advance or a technological uncertainty, rather than a listing of capabilities
  • A good understanding of the industry baseline. What others are doing and why your solution is different.
  • Be specific with technological (and scientific) details. HMRC don't like to hear generic terms such as 'it was uncertain how to integrate X with Y because of scalability problems' (and similar examples). Rather, they prefer for companies to state exactly why is this the case at a technical level.
  • Clearly articulate what has been excluded and why as well as what has been included (and why), this helps HMRC to know that you understand the R&D guidelines
  • Link the technological advance and uncertainties. For the claimed costs to be R&D they require both. If you say that capability A was an advance and capability B was uncertain, then you are not fully articulating that either is fully meeting the R&D Criteria.
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