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Accountants' R&D tax claims software: all you need to know

Research and Development (R&D) tax credits are a government incentive for companies that invest in innovation projects. The credits are available for businesses and companies in all sectors and are an excellent cash source to push R&D projects faster. They are a great way to inject money into businesses to boost innovation and help them grow.

It is no surprise, therefore, that many businesses want to get a piece of the pie. Applying and securing the tax credits can be quite a puzzle to figure out, however -there are many different kinds of claims and approaches to sort through!

There are a couple of conventional ways to go about claiming the incentive. One is to enlist the services of a specialist R&D tax credit adviser, and the other is to use their internal accounting team to claim their credit. Both go through the process for the company, from selecting eligible projects to the actual filing of the claim.

Like the majority of other business applications, technology is making headway into accounting. R&D tax claims software are a new alternative method of applying for the tax credits.

What is R&D tax claims software?

This is a new type of software that offers accountants the tools to prepare and file R&D tax claims. They are used to complement an accountant's services - rather than hire an external specialist to make the claims, they can be done in-house for faster delivery.

How do R&D tax claims software work?

The application process for R&D tax claims doesn't change. The software only helps with the automation of parts of the process. Some of the automation in the process include:

  • Screening of eligible projects
  • Data collection
  • Review and editing of the reports
  • The flexibility of the claim process to suit your business
  • An audit of the current claims for standardization with previous HMRC tax inspections
  • Determine the total value of the R&D tax claim for the company

Before beginning the R&D tax credit application process, some software will help one weed out ineligible entries and narrow down the accounting period required to make a claim.

Since everything is done online, there's a reduced risk of data entry errors. The questions may be structured as multiple-choice, drop-downs or slider menus to make the collection process faster, easier and standard.

The software makes it easier to generate reports by providing templates for the required R&D tax credit claim. They will also guide the user on the necessary information to complete the CT600 and any additional requirements for HMRC compliance.

R&D tax claims software have the edge over conventional application methods in that they are much faster because of the automation. They have their limitations, however. Some of the perks that an accountant or an R&D specialist can provide and the software can't include:

What you should know about R&D tax claims software

Although using an R&D tax claims software may save up a bit of time and administrative costs, it still leaves a lot on your plate to solve.

Some of the tasks you still have to do are gathering information and doing the technical writing for the claim. This means that you will need to understand and separate the qualifying projects from the rest of the company's projects. Because you'll be doing the writing, you'll have to gather the correct information and form it into an understandable document for the HMRC review. It also means that the burden of ascertaining the claim's quality and accuracy falls on your shoulders.

This is a complex, time-consuming part of the process that can very quickly go wrong. Filling the claims yourself means that you may get less than what you're qualified for. An even more dangerous effect is if you fail to spot errors, you could end up with HMRC enquiry letters and even penalties on your hands! The software can only automate bits along the way, but whether the claims pass still depends on you.

Final thoughts

R&D tax credits have plenty of benefits that can transform not only your business but also for the government and the economy as a whole. An R&D tax credit software is an excellent tool to reap the benefits of modern day technology for accounting-saving plenty of time and administrative burden on your company.

However, to reap the full benefits of using these software, it is best to work with a specialist R&D tax advisor to fill out what the software cannot.

Join us on LinkedIn Live!

If you liked this, then you’ll love our upcoming LinkedIn Live event!

On the 23rd of April, 2021 at 11 am, our very own CEO Wesley Rashid and R&D Manager Anh Vu will be joined by Edo Salvesen, CFA and Director of Finstock Capital, to discuss everything you need to know about claiming R&D Tax Credits in - “Unlocking your R&D Potential”.

Attendees will be invited to join Anh for a complimentary 1-on-1 R&D clinic, don't miss it!