You must keep detailed and accurate records to prove any claims for an R&D loss tax credit.
Your R&D project documents should include
- information about the project's content and scope
- financial information to prove eligible R&D expenditure for a cashed-out loss.
All companies must keep records:
- of income, expenses, assets and liabilities
- for seven years after the end of the tax year they relate to
- in English, unless we approve you using another language
- in electronic format.
Companies must also be able to prove they:
- carried out eligible R&D activities
- have eligible expenditure in relation to those activities
- meet all eligibility requirements of the scheme.
To calculate the wage intensity for R&D purposes, you must be able to separate and show the amount of salary & wages (including R&D contractors) spent on eligible R&D activities and the amount spent on business-as-usual activities.
Timesheet entries or electronic time recording data that has been recorded against the R&D project(s) you're claiming for are a suitable example of wage records.
Eligible R&D expenditure can be tax deductible. If you're making a claim, you must keep records and source documents that prove the tax deductions are eligible by clearly identifying specific R&D costs.
Contractor costs can contribute to eligible R&D expenditure.
Documents must show:
- the terms of any contract
- what part of the project the contractor is contributing to
- what part of the contract is non-R&D
- any clauses that outline confidentiality and ownership of any resulting intellectual property.
If staff are only involved in eligible R&D for part of their time, an apportionment method must be used to separate out eligible and ineligible expenditure.
Apportionment must be:
- supported by documents and working papers
- capable of being substantiated.
You must also clearly show your calculations for apportioning expenses.