A compliance check can seem intimidating, especially with the correspondence between HMRC asking for different pieces of information regarding the claim period and any activities undertaken. Discerning what is needed from yourself as the client and how much needs to be provided seems like a daunting ideal, however knowing what HMRC will be asking and the information required can help reduce this stress tenfold, and that is what our qualified advisors are here to help with.
HMRC will require some base information for the compliance check, relating both to the financials claimed for and the project itself enacted. While certain pieces of evidence within the project itself are not obligatory within the compliance check, they can help expediate the process.
The financial breakdown will be related to the payroll, and how much time each employee has spent on the project themselves. When the qualifying costs have been applied for, our accountants will break these down based on the percentage submitted by each company for employee’s time per project; often, we see these figures around 10-25%, but for some engineers, scientists, and other such involved roles, these can be much higher. HMRC will expect for these figures to be justified by the work undertaken by the employees, which can be reflected in rotas, reports and any other project documentation possessed.
Once this has been broken down and added into the report, an explanation of the financials will be provided to show how the qualifying expenditure is bolstered by the governmental addition, which will be calculated by the finance team alongside provided costings.
HMRC will also want to know any financial information which can influence the claim itself, such as company earnings, subcontracting information and any government grant or loans undertaken by the company during this time period. This sounds like a lot of data, but after a simple yes or no chart within the report, this is easy to convey to HMRC, and will all be information readily at hand through accountants or within financial paperwork.
While evidence is not inherently needed within the project, as records can of course go awry, it goes help to keep as much as you can to hand – we cover record keeping and HMRC documentation here [Insert link to documentation blog] – and there are some pieces of information HMRC will expect to receive regarding the work enacted.
For the employees who worked on the project, to prove they are competent professionals within their fields they are expected to be able to produce a CV, details on their qualifications or any other supporting evidence which highlights their expertise within this field. While university qualifications can work towards making a professional within a field, practical work and experience are just as recognised within the government guidelines, and evidence of this will be just as accepted as qualifications or other such academic achievements.
The main purpose of this is just to provide credentials and show HMRC that expertise was present during the project itself; one of the specifications for R&D is that the project must not be ‘readily deducible’ by a competent professional within that field, which is one of the main points of contention that we argue for you during these checks.
More information may be required over the course of the compliance check as well. If the report details a certain advance achieved, such as a technical invention or a medical improvement, HMRC may ask to see proof of the advance, which will depend based on the project at hand; a few examples of this would be photographs of a room with specified improvement designs, prototype blueprints to show progress or reports of any findings. No matter the project, any paper trail or evidence can be supplied to HMRC as supporting documentation.
To find out more about Kirby & Haslam’s Compliance service, click here.