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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.

Eligibility

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.

Wage records

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. 

Deductible expenses

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.

Contractors

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.

Apportioning expenses

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.