Record Keeping

General

As part of the overhaul of the R&D scheme, HMRC now places a greater emphasis on record keeping during the R&D process. As of 1st April 2024 HMRC expects companies to keep more detailed records for each project that contains R&D or potential R&D. These are familiar things we cover every year, however, HMRC now expects the information related to R&D projects to be recorded more formally.

There must be a clear boundary between making an unexpected discovery and carrying out R&D work. To claim there must be a defined project which seeks a specific advance, even if this is part of a wider project.

Once you have identified scientific or technological uncertainty in a project, sub-project(s) or set of tasks focused on resolving a technical or scientific uncertainty you should begin recording the following information:

Employees

  • The effort of each individual on the R&D project; a description of the activities that were carried out and the dates of the work

Externally provided workers/ agency staff

  • Their R&D work and the date and time it was done
  • Evidence that they paid PAYE and NICs (for example, their Employers’ PAYE reference and their employee reference)

Subcontractors

  • The proportion of their costs that was done on qualifying R&D activity
  • A contract for the subcontracted work
  • Evidence to show that the claimant and/or subcontractor had had in-depth knowledge of the R&D to be conducted

Competent professional

  • The name(s) of one or several “competent professionals” for the R&D activity. Competent professionals need to be shown to be involved in the development and review of the R&D process.
  • This is a new requirement, more information about the role of a competent professional and what they are expected to do can be found here

Where work is done off-site whether it has been done in the UK or abroad.

Before You Start an R&D Project

The scope of the work to be done:

  • An assessment of if there will be any R&D within this project, and if so, can it be grouped with other similar R&D elsewhere across the company?
  • A clear statement of the technological aim of the project (“what advance is being sought”). And why this is different from the current state of knowledge.
  • A description (including, say, URLs) of research undertaken to establish the state of public domain knowledge (not just the company) at the outset
  • You must be able to show a link between your company’s trade and the R&D project
  • An initial method statement describing what approaches are to be attempted and how success is to be measured. And any foreseen difficulties.
  • Any known technological constraints or conditions that make already-known technological solutions inappropriate or inadequate
  • The competent professional on the project

During an R&D Project

How has the project progressed:

  • Were there any changes in direction? If so, what and why?
  • Were there any failures? A project doesn’t have to be successful to count as R&D.
  • Experiments and test results
  • Any technical or scientific uncertainties that arise from your R&D
  • What were the technical discussions?
  • What were the resolutions to the uncertainties?

At the End of the Project

A review of the information that has been recorded to make sure it shows the activity that was actually done.

Applying These Changes

The simplest (and cheapest) way to ensure that you have sufficient information for HMRC will be to capture the data as you go, making this process part of the routine way of working for R&D Projects.

Company and project operations (including QA)

Consider incorporating R&D record keeping activities into day-to-day business processes, for example:

  • Review meetings, progress meetings: R&D agenda items and data recording
  • Management reporting: R&D objectives and progress, new initiatives
  • Project initiation: Enhanced technical risks register, subject to version control
  • Project management: scoping projects, effort recording, evaluation for R&D
  • Project completion: updating R&D information, capturing newly evident R&D
  • Project expenditure classification processes: for example, making sure that expenditure is logged against specific projects.

Legal

  • Supplier contracts need to include information on who is actually conducting the R&D. It is possible that the R&D you are claiming could be seen as being done solely by a subcontractor. In this case, you would be unable to claim for the project, but your subcontractor could.

Financial – purchasing

  • Capturing R&D evidence data from suppliers
  • Contractors Employer PAYE reference
  • Expenditure classification processes