One of the biggest challenges businesses and startups face when starting an R&D claim is remembering what R&D activities they did, who did them, when, and the exact costs involved. These details are easily lost in the innovation process, but are essential for smooth, successful R&D claims.
That’s why we have developed this guide to help you keep track of the important details and make your R&D Tax Incentive claim easier and more achievable.
What Records to Keep
The first step in keeping clear records for a smooth R&D Tax Incentive application, is knowing what records you need to keep. It’s easy to throw out the wrong paperwork, write down the wrong things, and forget information over time, but when this happens it can make writing and substantiating your application much more difficult.
To successfully claim the R&D Tax Incentive, you must maintain detailed records of:
- R&D activities
- How the work was done
- Who did the work
- When the work took place
- How long it took
- How much the R&D activities cost
Without records of this information, you risk claim denial or stressful audits.
R&D Activities Documentation
When creating a R&D Tax Incentive application it’s essential to identify the eligible R&D activities completed . These activities must satisfy:
- Technical Uncertainty
- Experimentation
- Generation of New Knowledge
Once you know which activities are eligible, you can then start to take detailed records, such as:
- Project Plans: Outline objectives, technical uncertainties, and established hypotheses.
- Experimental Data: This includes notebooks, test results, trial runs, and design documents.
- Project & Time Tracking: Keep documentation of all work completed with clear dates and times and details of who did it, this could include progress reports, meeting minutes, and correspondence discussing activities, challenges, failures or successes.
- Physical Evidence: Document any evidence of innovation or progress, such as photos, videos, prototypes, software code iterations, or physical samples.
These records are critical for substantiating your R&D claims, proving that you created the new knowledge or product yourself and that the outcomes could not reasonably be known in advance.
Expenditure Documentation
In addition to the R&D activities completed, you also need to keep clear records of all expenditure related to the eligible R&D activities. This includes labour costs, contractor fees, and equipment purchases. Keep track of all financial documentation, including:
- Employee timesheets
- Work logs
- Contracts
- Invoices
- Purchase orders
- Receipts
- Asset registers
- Diary entries outlining the exact amount of time spent on R&D
Plan for Success
Best practice is to make a plan before you commence development and then keep records as you go, however, it’s never too late to start collating your records.
The best way to start is to create a “High-Level R&D Plan” that outlines your planned activities, timelines, budgets, and who’s expected to work on each project. This document can then be updated regularly with exact activities completed, durations, expenditure, and responsible team members.
Additionally, implementing a structured filing system can make it easier to keep track of notes, invoices, timesheets, receipts and more. Both of these processes can be completed physically or digitally.
Digital R&D Project Tracking Software
There are a vast range of project tracking tools and software available to businesses to help simplify tracking and documentation. If you’re looking for somewhere to start, you can use your existing CRM platform to track notes, times, and documents. Spreadsheets are also a powerful documentation tool.
Regular Documentation Tips
Once you have your chosen documentation tools set up, set aside time to regularly document R&D progress. Encourage your team and contractors to take notes of any work completed as they go, outlining activities, time taken, and costs incurred. Details can skew or get lost with time, so documenting in real-time is the best way to ensure accuracy.
Using these notes, you can then compile the information into a “High-Level R&D Plan”. Update this plan weekly, fortnightly or monthly, ensuring it stays up-to-date and includes all relevant information.
Ensure a Seamless R&D Tax Incentive Application
Having a clear, up-to-date R&D Plan can help ensure a seamless R&D Tax Incentive application. At Rimon Advisory, our R&D tax specialists are here to help you navigate the complexities of the R&D Tax Incentive, ensuring eligibility and clear documentation. Whether you’re a startup or an established enterprise, we are here to help you make the most of the R&D Tax Incentive to support your innovations.
Rimon Advisory’s experienced R&D tax consultants can help you submit a R&D claim, from tracking your project, to submitting your application, and everything in between. Reach out today for expert support.
