MSC R&D are often asked to review previous claims when we first engage with a client. More often than not, we identify areas of non-compliance. The following are the most common.
Project activities outside the scope of R&D included.
Software projects that will not be treated as involving qualifying R&D include:
- The handling of interactions with others. This covers areas such as development of data entry procedures and user interfaces
- The visual presentation of information to users
- Creating software that replicates an established paper procedure, possibly building in best practice. The fact that a previously manual task has been automated does not by itself make it R&D
- The assembling, carrying out routing operations on, and the presenting of data
- Using standard methods of encryption, security verification and data integrity testing
- The creation of websites or software using tools designed for that purpose
Expenditure outside the qualifying categories included.
There are a number of potential issues you need to consider when calculating qualifying expenditure. Here are just a few examples:
- Have you included managerial time for running, and administering the projects? These staff are often omitted from time recording systems, but they should not be forgotten.
- And an R&D share of general software such as Windows licences? You can claim the appropriate portion.
- Have you considered whether any offshore workers (especially in software) are sufficiently controlled to count as externally provided workers? An externally provided worker claim requires supervision rights, but these do not necessarily require personal contact.
- Are you loosely claiming for utilities other than heat, light and power?
- Are you claiming for renting computer facilities such as server capacity, because this is not a qualifying category of expenditure?
- Are any of the externally provided workers also your employees or directors, because these cannot be claimed as epws?
- Is the expenditure deductible in the tax computation for the period? This is a necessary condition for the claim to reliefs under the SME or RDEC R&D regimes.
Special rules for connected parties are not applied
No account is taken of subsidies or notified State aid
Failure to recognise they are not SME’s
Strong compliance is imperative as any HMRC enquiry protracts the claim process, and penalties for inaccuracies can reach 100% of the potential lost revenue.
If you are not sure - we would be happy to give your claim the once over.