What Makes a Good Technical R&D Report?

R&D tax credits are one of Ireland’s generous tax incentives for innovative companies pushing the bounds of science and technology. Investment in research and development (R&D) projects is rewarded by a credit calculated at 25% of the corporation tax. However, obtaining this generous credit is dependent on an accurate, convincing and precise technical report.

The technical report, or technical narrative, is not strictly required to make the claim, however it is strongly advised in order to avoid an enquiry from Revenue, which can be costly and time-consuming. Submitting a claim to Revenue without justification will immediately raise eyebrows, not just for the R&D tax credit claim but regarding the company as a whole.

What are R&D tax credits?

Open to all Irish companies, regardless of size or sector, this Revenue-backed scheme offers companies engaging in R&D activities a benefit in Corporation Tax or, in some cases, as a cash credit. So long as you pay Corporation Tax and are making advances in science and technology, then you are likely to qualify. The most obvious way to know if you are eligible is to ask, are there technological or scientific uncertainties that your company is overcoming from the outset of the project?

Who should write your technical report?

The first step in writing a technical narrative quickly and effectively is selecting the right person for the job. Often, the best person to write about R&D projects is the person who was most closely involved in the projects. They likely know a great deal about the details of projects and can hopefully explain it in both technical and layman’s terms. However, depending on the size of your company, this person’s time may be stretched as it is and recapping the technical uncertainties of the projects undertaken may not be the best use of their time.

With limited capacity, adding another staff member to the technical report team may be wise, as it won’t disrupt the usual running of business too much and can offer some perspective on what has been written. Having multiple people credited on the report can also make it appear more robust to Revenue, as the project gains credibility from a larger team.

Importantly, make sure your technical narrative is told from a technical point of view. Having a manager write your report can often result in an unfocused piece of writing which considers things which aren’t relevant to the specialists at Revenue who are deciding whether your project is an advance in technology or science. Issues with customers, logistics or funding, as important as they are, are not technical challenges. Managers tend to include these details, along with problems around stakeholders, project planning or deadlines, which will not help your application.

Gathering the data

Once you’re sure that your writer has adequate time to write and experience in the technical aspects of the project, it’s important to make sure you answer all the questions that Revenue may have for your project.

As you can make a R&D tax credit claim up to one year after the end of your accounting period, many people find it hard to recall the details of technical challenges faced over an accounting period. Good record-keeping can make the journey much easier, for both the cost side of your claim and the technical side. Knowing who did what when will save you lots of time asking around and trying to find any revealing scraps of paper. If R&D is a big part of your growth strategy, this is even more important, as larger claims are more likely to be scrutinised.

Writing the technical narrative

Getting your narrative across in a way which covers everything without overwhelming your reader is a tricky skill to learn. At Myriad Associates, Tax Cloud’s partners, we have been doing this for years and have a few tips to share:

Don’t stray too far

Revenue is only interested in proof of a technological advance. You need to show that your team had challenges which were not easily solved during the project and that they overcame, or are in the process of overcoming, these challenges. Remember, ongoing and failed projects are still eligible and are more likely to show that the challenges were not easily deducible.

In every sentence you write, make sure you keep coming back to what Revenue wants; proof of technological and scientific uncertainties which are resolved through research and development.

Keep it stupid simple

Using technical jargon and buzzwords will not make your claim seem any more valid. This is the chance for your technical lead to explain all their hard work, which can be very exciting, but the R&D tax credit team at Revenue are not experts in every field and will need a concise report which assumes nothing of them. Your report needs to find the balance between explaining your technical challenges to a five-year-old and a peer of the industry.

Match your claim to your project

Although it can be tempting to write reams and reams of paper to prove your project is innovative, it’s best to consider how big the claim is and work from there, as someone on the other side is going to have to read it all. As a rule of thumb, look to write 2 to 5 sides of A4 with short, snappy sentences. The Tax Cloud platform comes with built-in character limits, to make sure that you’re not wasting time on writing which Revenue won’t read.

Make the process easier with Tax Cloud

Our user-friendly R&D tax credit portal, Tax Cloud, was designed to help smaller companies navigate the murky waters of Revenue’s requirements. Guided by you, Tax Cloud provides all the questions you need to answer and is reviewed by the experts at Myriad Associates, so you can rest assured that your claim is robust, secure and maximised without paying the fees of the traditional service.

For more information on Tax Cloud, call our expert team on +353 1 556 2001 or use our contact page.

Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud