The fourth video in the series focuses on your R&D expenses and their eligibility under the tax incentive regime. Essential to your expenses being eligible is ensuring that they are directly related to your core R&D activity.

The video series is aimed at giving businesses a succinct overview of the tax incentive regime, so that you can start implementing what is required to benefit your R&D incentive claim. We will be adding to the series as the regime develops and Inland Revenue releases further operational information. Check out our videos to date on our approach to the R&D tax incentive and what the R&D tax incentive is.

Of most importance to your business, are the recent steps taken by Inland Revenue and Callaghan Innovation to develop the In-year approval mechanism (for the 2020-21 onwards) and Supplementary R&D return form. Inland Revenue and Callaghan Innovation will be working alongside each-other to administer the regime, with Callaghan Innovation providing technical oversight for in-year approval and claim processing.

Registration for the incentive

Remember, to access the R&D tax incentive, you must have registered with Inland Revenue. Registration can be actioned through your MyIR portal in the “I want to…” tab.

You will be required to demonstrate your eligibility to register. If you think that you are not eligible or the questions result in you not being eligible, please give one of our team members a call.

If you are doing legitimate R&D, its more likely that you have accidentally clicked the wrong box!

In-year approval and supplementary returns

Once you have registered, to access the incentive you will be required to file a supplementary R&D return.

Both the Supplementary return and In-year approval (available later this year, for the 2020-21 year onwards) will require you to explain your R&D projects and activities (core and supporting) at a level of detail sufficient to convey to Inland Revenue and Callaghan Innovation that your R&D meets the eligibility tests.

The information that is required can broadly be broken down as follows:

• “Project” information – while “project” isn’t defined in the legislation, its expected that you will convey your R&D in terms of a broader project. The broader project may be made up of multiple core and supporting R&D activities. We expect your R&D will be aggregated to the highest level to ensure a less onerous In-year approval and supplementary return process.
• Core R&D information – you will be required to explain your core R&D activities with respect to the technical pieces of the legislation, relative to the wider project. That is, you will need to demonstrate the scientific or technological uncertainty, new knowledge, and systematic approach.
• Supporting activities – you will need to summarise your supporting R&D activities, and demonstrate that they are integral to your core R&D activity.
• Joint ventures/partnerships disclosures – you will need to disclose to Inland Revenue when you have performed R&D in a joint venture or partnership, and the level of interest each party has in the R&D project. This is required to ensure that multiple taxpayers are not claiming for the same dollar.
• Associated persons – you will be required to disclose whether associated persons are intending to claim for the tax incentive. This is required to ensure that associated taxpayers are not claiming for the same dollar.
• Expenditure – you will be required to summarise your estimated (In-year approval) or actual (supplementary) eligible R&D costs as part of the In-year approval and supplementary return.

We look forward to providing you with more information as the In-year approval mechanism is made operational.