Tim Morgan descries how UK tech startups should make R&D tax credit claims.

1. R&D tax credits
how tech startups should make their own claims

2. There are 3 skills you
need to do a return
• Understand software/technology
development
• Understand accounting;
• Be able to write about technology and its
importance/specification/innovation to a
non-technical reader

3. Understand “where” your
qualifying work is
• A project seeks to achieve an advance in science and technology (not arts
or humanities);
• Only activities that contribute to this advance through the resolution of
technological uncertainty are R&D;
• An advance in science or technology means an advance in overall knowledge
in a field of technology (not just a company’s own state);
• Readily deducible by a competent professional test;
• How hard is your technology to clone?
• Are you the first to market or is your product derivative?

4. Ascertain your
qualifying activities
• List (by month) the tasks/features/things
your startup worked on;
• Identify those that are qualifying;
• You’re ready for the accounting bit.

5. Understand accounting
(i) qualifying costs
• There are only 5 - pull them out of your
management accounts in their entirety
• Staff (salary, pension and NI)
• Subcontractors (restrict to 65%)
• Externally provided workers (restrict to 65%)
• Software
• Consumables

6. Staff costs
• Apportion staff costs according to time
spent on qualifying activities:
• Not everyone will contribute;
• Back end devs tend to contribute the
most;
• Make assumptions, note them and apply
• There are very few people in the world
with 100% productivity

7. Non-staff costs
• On an invoice by invoice basis - ask your
accountant for a breakdown/dump from
your accounting software.

8. Understanding accounting (ii)
calculating your claim
• Starting point is lower of:
• losses for the year; or
• 175% (rising to 200%) of qualifying
expenditure
• Multiply by 14%
• Compare to total NIC/PAYE, take lower
figure

9. Can you write well?
• You’re now ready to write up your claim;
• Separate qualifying projects;
• Answer the 4 questions;
• What is the advance?
• What is the technical uncertainty?
• How was it overcome?
• Why wasn’t the knowledge deduced by another competent
professional?
• Use bulletpoints/lists. Qn 3 is the answer to Qn 2
• Use 3rd party links to demonstrate innovation (eg awards won)

10. Order
• Intro
• Evidence (top level eg awards/recognition)
• Project list (if more than one)
• Project 1 1-4
• Project 2 1-4
• etc

11. Accompanying tax
return (accountant)
• The only bit you can’t do yourself (you
could but you’re probably not inclined)

12. What happens if theres
a query?

13. Tips
• Most innovation happens early in a startups
life
• Document and record everything. Ensure
you have supporting evidence of your claim
• Read HMRCs website - contact their
advisors - they really are there to help

14. Resources
• Do it yourself - the best person to do it is
a founder
• Me tim@picklive.com @thetimmorgan
• David Biggs david@mintdigital.com