The ultimate guide for year-end submission
The end of a financial year is always a busy time for companies in any sector. Apogee, in partnership with Fusion Accountants, are sharing some useful tips to help you gather all the information you need to report to HMRC, including your R&D Application!
Financial year-end reporting is required by law to guarantee that a company pays the correct amount of tax and to disclose accurate information about the company to the public, banks, shareholders, and potential investors. Therefore, it’s important to arrive to this moment of the year ready for the submission.
1: Preparation is everything
Ensure you have the right strategy in place. Brief your team a few months ahead of time to ensure that you are cutting costs and tracking down outstanding purchase orders and invoices in the run-up to the end of the year. Keep your costs low and ensure they are all processed and entered into your system.
2: Ensure that your accounts are up to date
All of your bills, invoices, bank statements, and other financial records should all line up with your accounts.
If you have not paid for any sales you made before the end of the year, list them as outstanding debts. Ensure all necessary information, such as the invoice number, date, and total amount are up to date.
3: Check your financial statements
Every account type is listed in detail in a chart of accounts, including account codes and numbers for various assets and liabilities. You can easily record information and add or remove accounts. A default chart of accounts that comes with most accounting software (like Xero and SAGE) will work for most businesses, but you can customise it to meet your company’s specific needs if you like.
4: Keep your personnel information up to date
You will need to ensure that all your employment information is valid and up to date at the end of the year. When conducting an audit, HMRC usually examine payroll and expense records to confirm that everything is as it appears. They will also cast an eye over your National Insurance and taxation.
5: Do some much-needed admin housekeeping
Achieve administrative perfection for the whole fiscal year. For example, print and organise receipts and invoices or organise them in folders on your computer system to keep track of them.
You may want to look at Expense Management software like Expensify, Spendesk and Pleo (or accounting software like QuickBooks), which can manage expenses.
Round up all your paper and online documents, so you will be ready if any part of your financial reporting is challenged.
This process is much easier if you get into the habit of staying on top of your financial admin throughout the year. We’ve all fallen into the trap of prioritising other things longer than we should, and before you know it, you’ve got a huge admin task to get through.
Staying on top of it as you go makes your life easier and is more efficient in the long run.
6: Make back-ups
Financial year-end reporting takes a lot of data and time to organise, so regularly back up your accounts and tax return. In this way, if any data is lost, you can pick up from where you left off.
Include your R&D application in your Tax Return Form
The document you need to provide HMRC with is your Company Tax Return Form (CT600). This document will also allow you to submit your R&D Application, which is a great way to offset part of your current and future Corporation Tax Bill or give your business a cash injection.
Before submitting your R&D application you need to remember:
Be aware of your year-end. After the deadline, you lose the option to make an application for your retrospective year. For example:
- If your year-end is March 2022, you can recover the costs from the periods ending March 2020 and March 2021, in addition to your current 2022 year after it’s closed off. If you submit your application afterthe end of March 2022, you will lose the option to make an application for March 2020.
You also have the option to reduce your Corporation Tax (CT) bill. Typically, you pay CT 9 months after your business’s year-end. If this is coming up, an R&D application could be a great way to reduce your CT bill!
Consider your company size and make sure you are recovering under the correct incentive – the SME incentive (for small to medium businesses) or the RDEC incentive (for larger companies). Remember, you also need to consider the implications of potential funding received, such as COVID-19 support funding.
3: Understand your recovery options
The R&D benefit can be received in many ways and differs from a profit-making to a loss-making company. The benefits of each recovery option vary depending on the circumstances; profitable companies will get a reduction in future tax payable, or a refund of tax paid, whilst loss-making companies can choose to get a reduction in future tax payable or a cash credit.
Remember, your tax position will influence the way that your R&D benefit will be received. Understanding these implications can help to ensure your recovery is maximised.
4: Use an expert
The guidance provided by HRMC on the R&D incentive is a lot broader than people realise, so it’s important to ensure you are recovering costs from all eligible projects. As there are multiple misconceptions around the costs that are eligible to be recovered, using an R&D expert will ensure you get these correct and are recovering costs against eligible projects .
Don’t get caught in the rush of the year-end submission! Follow these tips and make any month your favourite month of the year!