The importance of competent professionals with R&D tax credits
August 10, 2021
Research & Development (R&D) tax credits are government incentives available to companies investing in advancing technological or scientific capabilities. While filing claims often falls to a claimant’s tax team, the key to ensuring claims are optimised and robust is the assessment of qualifying R&D activities by a company’s ‘competent professional’.
To help ensure R&D activities are correctly assessed, we’ve set out three things claimants should consider:
1. Who is a ‘competent professional’ and why are they important?
The competent professional is the individual who understands the underlying scientific or technological elements of projects and will be responsible for making a judgement on whether or not a project includes eligible R&D activities. Should HMRC query the nature of the R&D activities, it is the competent professional who will need to explain their reasoning. So, it is fundamental that a company’s competent professionals are given guidance and support to make the correct assessment of what would be determined as qualifying R&D by HMRC.
2. How can tax teams ensure competent professionals are making the right decisions to result in optimised and robust claims?
Although the judgement of R&D activities lies with the competent professionals, the accuracy of the R&D claim within the tax return is the responsibility of the tax team. So, the tax team must be happy with the judgments made by the competent professionals.
It is therefore important that tax teams ensure the competent professionals are given detailed guidance and access to relevant industry expertise to help them understand what activities qualify as R&D for tax purposes. This is why at PwC we have a team of qualified engineers, scientists and technologists with relevant industry expertise and experience in agreeing with HMRC which activities qualify as R&D for tax purposes.
Alongside the accurate identification of the R&D activities by competent professionals, it is essential that quality documentation is prepared which demonstrates the types of R&D activities identified, and how they meet key criteria of ‘advance’ and ‘uncertainty’. To ensure claims are as robust as possible, we recommend all claimants file quality documentation to support claims and minimise HMRC queries.
3. How can tax teams ensure R&D claims are robust but minimise the time burden on tech teams?
While companies can file claims up to two years after the end of the accounting periods, we strongly advise companies to implement a real-time approach to identifying R&D activities. This not only minimises the time needed from the competent professionals (as it is easier for them to provide the required details on what qualifies), but our experience shows more R&D activities are identified, as competent professionals find it easier to recall the details. This approach is also prefered by HMRC.
In conclusion, our advice to all claimants is to invest time in helping competent professionals make the right judgements on what qualifies as R&D which should help ensure the value from claims is optimised, both in terms of cash received and a claim that stands up to HMRC scrutiny.