Project Plans and how they affect R&D Tax Credit claims

The government continues to put the UK’s R&D Tax Credit schemes under the microscope. This has led companies being required to provide a greater volume of reporting documentation for claims, with innovative companies facing greater administrative and practical burdens as part of claiming R&D Tax Relief.

Provide a ‘Project Plan’ to support your claim

Companies claiming R&D Tax Relief, or those under HMRC enquiry, are required to show that they followed a clear and organised methodology throughout their projects. One area that is proving troublesome for some qualifying projects is the need for a ‘Project Plan’.

BEIS Guidelines (Para 19) describes a project as “a number of activities conducted to a method or plan to achieve an advance in science or technology”.

Why might this be a problem?

• R&D projects come in all shapes and sizes, and they can be conducted by organisations of any size or complexity.
• Some organisations will keep detailed R&D Project Plans, records and documentation from conception to completion, as part of their general Project Management practices. Others may not have the administrative capacity to see it as a priority, or they may not deem it necessary for their internal operations.
• Many companies conduct claims retrospectively, and thus may not have completed an in-depth and documented project planning phase as part of the process.

The problem here is that HMRC are now requesting a detailed Project Plan to aid in the review of qualifying R&D Tax Credit claims, and a project plan cannot be drawn up retrospectively.

This is leaving some organisations with issues when it comes to fulfilling the requirements stipulated throughout a compliance check, when initiated by HMRC.

How can companies demonstrate a methodological approach to their project?

Within R&D projects, such as those funded through grants, the Project Plan is a key aspect of the project. To aid companies in understanding what would be required, the team here at Shorts have provided a baseline on which a Project Plan is formulated, this includes:

Project Budget

The project budget should include forecasted costs associated with project expenditure. If applicable, this budget should be further split to provide forecasted costs associated with each work package.

The forecasted budget may not provide the final R&D expenditure, however, demonstrating that the company has formulated a cost profile against the project will allow it to demonstrate planning activities have been conducted.

Work Package Breakdown Structure (WPBS)

Make sure this is factored in ahead of the project

If you are planning an innovative project, whether it is a new product, service or technological solution, it is important that you consider these components before the project's start.

To set the projects R&D claim up for success, and mitigate risk after the project's conclusion; through the provision of a Project Plan, you will be able to:

• Define project boundaries ahead of project kick-off
• Demonstrate that the project existed at the time of reporting
• Validate the work conducted throughout the team, which can be linked with project expenditure
• Validate that project planning has been conducted (BEIS Para 27b)
• Validate that the project has been run utilising a systematic and methodical approach to project management (BEIS Para 19)

If you are planning a project, the Radius team at Shorts can help you put a project plan in place or review the plan and documentation you already have in place to ensure you don’t run into issues later on, should you qualify and submit a claim for R&D Tax Reliefs.