The R&D tax incentive is a scheme that allows companies with research and development (R&D) projects to save money on their employees’ R&D expenses.
In order to apply, it is important to secure your monthly R&D claim, ensure that you are eligible and that you meet all the requirements.
When you start claiming for R&D tax relief on a monthly basis or claim for R&D projects for a retroactive period of 6 years, Skatteverket has the right to audit your claim at any time The objective is to verify that you are qualified to apply for the R&D tax relief and that you have all the required evidence.
A common mistake is to think that you were approved because you received the monthly tax deductions, or that you are automatically approved for an undetermined period into the future because you were once approved after a Skatteverket audit of a couple of months/years.
In 2022, 300 companies were audited, this is about 12% of the total number of companies that applied for this relief. However, of those 300 companies audited, only 35% were approved without any changes to their claim’s financial numbers.
Audits are generally not a comfortable process for companies, especially considering Skatteverket’s statistics. The fact that there are no clear guidelines, that it is time consuming and that the consequences, whether positive or negative for the claimant, can have a real and noticeable impact on the claimant’s financial situation, can contribute to this unease.
Securing your R&D tax relief is therefore not just an option, but an obligation if you do not want to risk having to refund the savings made or to avoid being charged additional penalty fees should the tax authority observe that incorrect information has been submitted, or that you did not claim in good faith.
You must therefore anticipate this and prepare your claim carefully.
1- Before your first claim:
You must identify the R&D projects as defined by the law, by using the Frascati manual and court cases that help provide guidelines to define what constitutes as qualified R&D. In short, for a project to be considered for R&D tax relief, the project must first meet a few criteria:
Research:
– Systematic approach
– Qualified R&D work
– Creating new knowledge
– Commercial purpose of the product
Development:
– Systematic approach
– Qualified R&D work
– Commercial purpose of the product
– Link with the result of research
– Creation of a new or significantly improved product
Identify eligible employees who meet a few criteria:
– Where the company pays/paid social security contributions for the employee
– Age
– Relevant technical skills and duties
– Minimum working time criteria
2- During the claim
It is not enough to only assess your eligibility at the beginning of the claim, you need to make sure you still have the right for every month you claimed for.
To claim securely, you must clearly understand all criteria and how Skatteverket interprets them since the burden of proof is on the company (i.e. claimant) that wishes to apply. Therefore, you must be able to adequately explain why and how your project work and employees meet all the above criteria, in addition to systematically documenting the work performed.
Anticipation is Key. Skatteverket has a strict interpretation of what can be considered as R&D and usually gives you a tight deadline to answer their enquiry. Since the answers are requested and delivered in a written format, it is therefore important to anticipate the audit requests and have the necessary document and justification ready beforehand: