Writing an effective R&D Tax Credit claim: Get the technical narrative right

Ah the technical narrative; the heart of any claim for R&D Tax Credits. It’s the chance to ‘sell’ your R&D project to Revenue, justifying why you believe the award should be given. And yet, for many companies it’s their downfall.

Too many firms in Ireland are missing out

If your company has completed any research and development work over the last couple of years that has made an advance in science or technology then R&D Tax Credits are for you.

Administered by Revenue as a way to incentivise innovation, R&D Tax Credits work to reduce your Corporation Tax bill by covering up to 25% of eligible R&D costs. This is on top of the existing rate of 12.5%, so in effect up to 37.5% of qualifying costs can be reclaimed from the government. Not bad at all.

The key to success, however, is knowing exactly how to put together an R&D tax claim according to Revenue’s very high standards. It’s a complex process that even the most competent and experienced of accountants themselves can struggle with. But by not applying - or applying incorrectly - your company could easily be losing out on tens of thousands of euros even for the smallest claims.

First thing’s first: Get the right person (and data)

The first step is to decide who in the company was most involved in the technical/scientific side of the R&D project. This should be the person who plays the biggest part in writing the technical narrative.

The employee chosen should be competent and experienced in their field. They need to understand the technical reasoning behind the R&D project, and the advancement made, and be able to justify it in detail to Revenue. Ideally they should also be a technical person or a developer and not a manager. This is because managers have a tendency to talk about things which aren’t directly relevant or helpful, like issues with users/customers, deliveries being late or problems with funding. They also tend to say too much about problems with stakeholders or project planning, as well resources, procurement and tight deadlines. Whilst all of this is very interesting, it isn’t actually anything to do with R&D Tax Credits so isn’t helpful on your application. Take away message: keep it technical!

One thing to note here however; be careful to make sure the person completing the technical narrative also has the time and brain space to do so properly; no rushed jobs or missed steps. The crucial thing here is that your technical narrative is completely solid and watertight. If capacity is limited, get an extra member of staff involved and incorporate some additional resource to deal with the Revenue’s questions on the technology - it’ll be far cheaper in the long run than dealing with an enquiry into your wider tax affairs.

Writing the R&D technical narrative

So now you’ve got the right person and the right data in place, how do you actually complete the technical narrative so it passes all the Revenue’s checking processes with flying colours?

Remember that Revenue is only interested in proof that a technological advance was made, and less in how you got there. It’s also assumed that the more difficult the process was in solving the problem, the more likely it is that R&D took place.

Your technical narrative is essential in bringing home the bacon. It’s your main opportunity to prove that not only was R&D conducted but that it also solved an uncertainty or technical problem that needed solving. As you’re writing, remember to keep it simple; going into way too much detail or writing reams and reams won’t boost your chances of success. Somebody at the other end has to read it all, so make it easy for them by writing short, snappy narrative covering roughly 2 to 5 sides of A4. Don’t use jargon either. Revenue needs to understand the problem and how you worked to solve it quickly and simply. Too many buzzwords and technical jargon will be off-putting to say the least.

The next thing is, make sure you match the length of your narrative to the size of the claim - sounds simple, but it’s really important. Although you need to include everything make sure your work is concise - absolutely no waffle!

Finally, don’t shy away from including information about R&D projects that weren’t actually successful. In desperately trying to paint the company in a good light, it’s tempting to miss off the bits that didn’t quite go to plan. But in fact, by including this kind of information it demonstrates to the Revenue that the problem was incredibly hard to solve, even for competent professionals.

Tax Cloud takes the pain out of R&D tax claims

Designed and created by the expert team of R&D tax consultants at Myriad Associates, the Tax Cloud portal can help both businesses and accountants navigate the R&D Tax Credits claims process quickly and simply. As part of our service, our technical experts will help you prepare your technical narrative in line with Revenue best practices to ensure your claim is secured and maximised.

It’s free to sign up too, with nothing to pay up front. And what’s really attractive about the portal (apart from 24/7 accessibility and ease of use) is the low fees. In fact, our fees are only paid once your claim is successfully completed and are set at either 5% of 10% depending on your claim value.

If your company is based in Ireland and you have a question - or would like an informal discussion about any aspect of R&D Tax Credits or Tax Cloud - feel free to get in touch with us today on +353 1 556 2001 or use our contact page.

Don’t forget, you’re also welcome to try the Tax Cloud demo to see how it all works. Plus there’s the Tax Cloud calculator where you can enter in your own figures (again for free) and see what you can claim. It may well be more than you think.

Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud