Where does a claim period begin and end for R&D tax relief?

Time marches ever on and for many innovative businesses, a new year may signal a newfound drive for seeking advances.

However, it would not be reasonable to expect all projects to be neatly contained within fixed time periods.

As such, it is necessary to understand how to define when projects begin and end and how to connect that with claim periods.

When does a project officially begin and end?

While it might be tempting to say that an R&D project begins when an innovative business first gets the drive to tackle an advance, Revenue have a clearer definition that must be followed.

For an R&D tax relief claim, the commencement of R&D is when work begins to address the scientific or technological uncertainty.

This means that an innovative business could spend years contemplating and researching an uncertainty to come up with a plan of action, but the claim does not begin until those plans start to turn into action.

The logic behind this is to prevent businesses from artificially extending claims or adding additional projects that only exist on a conceptual level.

The end of the project is less nuanced and is determined by the point where work ceases.

Revenue are ambivalent as to whether this means the project is successful, a failure, or abandoned, so long as the work has finished.

What happens when a project runs across multiple years?

As R&D tax relief claims operate based on the financial years of the innovative businesses, they are defined by the year ends of those businesses.

This means that it is not uncommon for projects to span more than one year.

When this does happen, it can be handled in a few different ways.

It is possible to include two financial years in an R&D tax relief claim.

If a project begins and ends within two consecutive financial years, it might be worth managing it like this, particularly if that is the best way to handle the incurred costs.

Alternatively, the R&D tax relief claim can focus on the work done on the project in the year or two being considered with reference to how it started before, or will continue after, that period.

When this happens, the main consideration is reflecting the work accurately in the technical narrative and not repeating costs that have already been claimed.

It is not unusual for Revenue to question in an enquiry if that project appeared on a previous R&D tax relief claim.

When this happens, being able to evidence what work is new for the current period is essential for demonstrating that there is no financial overlap.

After two financial years have passed, it is no longer possible to recover costs for an R&D project, even though older work can be referenced in the technical narrative.

We help accountants and innovative businesses understand the best way to represent R&D work in R&D tax relief claims so that value is not lost due to missed deadlines.

Part of this involves ensuring that clients submit an Advanced Notification Form (ANF) if they plan to submit an R&D tax relief claim for the first time.

Failing to do this can be another way that the time for including projects passes and access to funds is lost.

For expert support in capturing the full extent of R&D work, speak to our team today.

Adam Bointon