diff --git a/Finances/r&d-tax-relief.md b/Finances/r&d-tax-relief.md new file mode 100644 index 0000000..bc7ce7a --- /dev/null +++ b/Finances/r&d-tax-relief.md @@ -0,0 +1,144 @@ +# R&D Tax Relief + +## Background + +> R&D reliefs support companies that work on innovative projects in science and technology. +It can be claimed by a range of companies that seek to research or develop an advance in their field. +It can even be claimed on unsuccessful projects. + +> To get R&D relief you need to explain how a project: + +> * looked for an advance in science and technology +> * had to overcome uncertainty +> * tried to overcome this uncertainty +> * couldn’t be easily worked out by a professional in the field + +Put simply, if your company works on projects that meet some/all of the aspects outlined above, +you may be able to claim Corportation Tax Relief + +Source: https://www.gov.uk/guidance/corporation-tax-research-and-development-rd-relief + +**DISCLAIMER: this document is written only with dwyl's business in mind. +This is NOT financial advice: you are responsible for ensuring your submissions to HMRC are correct for your business.** + +## Process + +### Outline + +Our R&D consultant sends us template spreadsheets which we fill in with the relevant R&D projects we've worked on, +along with how much staff time and freelancer costs were expended. + +We then send this information along with our annual accounts and Corporation Tax computations to our consultants, and they process the claim for tax relief. + +**NB: It's best to have your annual accounts ready (but not filed) before you go through the R&D process, +so you don't have to pay your accountants to re-file the accounts with your R&D claim** + +### Defining Criteria + +You'll want to define the criteria for claimable projects in conjunction with your accountants / dedicated R&D consultants + +dwyl's agreed criteria are: + ++ All projects that are technically challenging (this includes anything we've done in elixir or elm as these are so new) ++ Both client projects and our own projects, both open source and closed + + Our clients can also claim for these same projects ++ Any code that we have created for our `learn-...` tutorials, but not the `README` itself ++ Both full time dwylers and freelancers +* Admin / finance / other non-coding roles count + +Unless there have been significant changes to your business since your last claim, it's unlikely you'll have to redefine criteria year-to-year. + +### Before you start + +You will need... + +* For payroll employees, you'll need to know how much the company has paid per employee in +**Employer's National Insurance Contributions** (Employer NICs), **Pension Contributions**, and **salaries** + * `Xero > Reports > Payroll > Payroll Activity Summary` - then select the financial period you need (likely to be "last financial year") + and select each employee from the dropdown +![screenshot 2019-02-05 at 14 44 54](https://user-images.githubusercontent.com/11595920/52280854-b4462b80-2954-11e9-9dcc-8629eb48388d.png) +* A spreadsheet or report with your **freelancer costs** for the relevant financial year (preferably filterable by person and project) +* A calendar or similar account of how many days each member of staff on payroll worked on each project +* The template spreadsheets from your consultant. Ours sent two: + * Project details + * Cost collection + +### Project details + +The template from your consultants should explain all of this as well. + +In response to a query about how much detail is needed, our consultants said... + +> you can get away doing detailed descriptions for the main ones with just a few bulleted advancements and uncertainties for the rest + +* Make a list of all the projects from the relevant financial year, which you think qualify +* Fill in any explanatory sections for each project + * Project dates + * Objectives: "overall objective of this part of the system and how it helps achieve the overall objective of the solution" + * Technology stack / languages / frameworks + * Technological advancements + * How is your solution technologically more superior to other similar solutions in the market? + * What are some of the particular functionalities the solution is capable of achieving that you find to be a unique combination that has not been attempted in the past? + * Unique 3rd party integrations, if any + * Technological challenges experienced + * Performance issues + * Browser compatibility issues + * Platform/Mobile devices compatibility Issues + * Integration Issues with APIs + * Multi-formatted data issues + * Deployment Issues + * Security Issues + * "Number of people involved / initial estimation of the percentage of their time spent resolving the uncertainties" + - it might be best to leave this for later; it's easier to produce this after the next section is complete, otherwise you'll be doing it from memory. + +### Cost collection + +This is the meat of the piece and can get quite fiddly; but if you've got all the info outlined above to hand, +it should be much easier than it's been for us so far (with info spread across various spreadsheets and platforms) + +Our template is split between "Staffing costs" (i.e. workers on payroll) and "Externally provided workers" (i.e. freelance workers) + +* First, get down all the projects you listed out in the other spreadsheet + * For payroll staff, our template has one block per project, broken down by month: +![screenshot 2019-02-05 at 15 22 28](https://user-images.githubusercontent.com/11595920/52283149-e1490d00-2959-11e9-83cd-cca501b2c7b8.png) + * For freelancers it's just a straightforward list with the person's start and end dates, no granular breakdown of time spent +* Input payroll staff's details: + * Name + * Start / end date at the company (only if they fall within this financial year, i.e. if the employee left or joined in this period) + * Gross Salary + * Employer NICs + * Pension contributions + * Reimbursed travel costs + * Bonuses +* Now go through your `Company Calendar` / whatever time-tracking system you use +and input how much time each employee spent on each relevant project, each month. (Yes, this will take a _very_ long time) + * Given the nature of our work, someone might be contributing work to a project that isn't captured in your usual time-tracking system + You'll need to use your best judgment as to how much time to add on if someone was e.g. doing project management, admin, etc. that wasn't explicitly captured + * You _can_ also go through client invoices to sense-check - but bear in mind that extra work is often done on top of what's directly charge to the client + * It can also be useful to look through a github user/repo's commit history, to see who's put time down to that project and when + * User: https://github.com/**{INSERT_USERNAME}**?tab=overview&from=2017-06-01&to=2017-06-30 + * Finally, you should write some simple spreadsheet formulae to sum each employee's monthly totals, to check that someone's not working more days than there are in the month + * Each month has about 21 working days, so use this as a guide + * If people have worked over weekends, this should be captured (but won't affect the results, as we don't pay overtime) +* Next, you'll do the same thing for freelancers (this is where that filterable spreadsheet from above comes in handy :wink:) + * List each project and its freelance personnel + * You only need their start and end dates, so just find their first and last invoice for each project + * Now input the sum total of all of their invoices for each project + * Since this is a **cost** collection excercise, your freelancer invoices are an account of your costs - no sense-checking needed here! + +### Wrapping up + +We've already mentioned sense-checking against invoices, github etc. +Ideally you'd also spend a couple of hours with someone who's close enough to each project to tell you if staff worked on them without it being captured. + +Once that's done, send your project list, cost collection sheet, and corporation tax / annual account details to your consultant and let them earn their fee. + +### Checklist + +* [ ] Fill in list of projects with details on why each one qualifies for R&D relief +* [ ] Fill in cost collection spreadsheet with details of staff and freelancer time/cost on each project +* [ ] Send the above to consultants along with corporation tax / annual accounts +* [ ] Await tax relief paperwork from consultants, then file with HMRC +* [ ] Receive decision from HMRC +* [ ] Check you've received £££ relief in your account +* [ ] Open issue for next year