Setting up from day one: records for a first claim

The difference between a first claim that goes smoothly and one that stalls is rarely the tax rules. It is whether the company can name its projects, show who worked on what, and pull costs by project from the ledger. After this module you will be able to set up those three habits in an early-stage company, so that the records every scheme asks for already exist when the claim is prepared.

What this module covers

Why the seven schemes all ask for the same three things: a defined project, a link from people and costs to it, and records made at the time.
Project naming: one name, defined by its technical uncertainty, used in every system.
Time records that will survive a reviewer's questions.
Cost coding in the ledger, including the facts about contractors, materials and grants you will need later.

What every scheme asks for

Strip away the forms and the seven schemes ask a first-time claimant three questions. What was the project, and what scientific or technological uncertainty did it set out to resolve? Who did the work, and how much of their time went to it? Which costs belong to it? The wording on each country's documentation page differs, but every one expects records made at the time rather than reconstructed when the claim is prepared, and every one expects staff costs to be apportioned using timesheets or another reasonable and consistent method supported by records. Three habits, set up in the first month, answer all three questions as a by-product of running the company.

Project naming: one name, used everywhere

For incentive purposes a project is the work done to resolve one uncertainty. Name it that way from the start.

Define it by its uncertainty. One sentence: what the team did not know how to achieve, and why existing knowledge did not answer it. "Launch the dashboard by March" is a commercial goal. "Detect gripper slip on wet surfaces at production speed" is a project.
Give it a short code and use it in the issue tracker, the repository, the timesheets, the ledger and board updates. Reviewers test the consistency between the technical description and the financial records; a shared code is what makes them consistent.
Keep a project register: code, name, the uncertainty sentence, the engineer who judged it uncertain, start date, status and end date. Dates matter because several schemes bound the claim by the uncertainty. In the United Kingdom, for example, R&D begins when work to resolve the scientific or technological uncertainty starts and ends when the uncertainty is resolved or work on it ceases.
Record who the competent professional is. Most schemes judge uncertainty by what a competent professional in the field could not readily resolve from existing knowledge. Name that person now, with their relevant expertise; it is hard to do credibly two years later.

What goes wrong: projects named after features or clients, so that qualifying and routine work share a code; and projects with no recorded end, so that later maintenance is swept in.

Time records that survive review

Staff costs are the largest eligible cost for almost every early-stage company, and they are claimed in proportion to time spent on the project.

Record by project code and by activity, for everyone whose cost will be claimed, including founders who draw a salary. Activity labels let excluded work be separated later: "experiment on slip threshold" and "fix fault in shipped release" differ even under one project.
Record weekly, by the person who did the work. Weekly entries by the engineer are records made at the time. Percentages assigned by a manager at year end are estimates, and reviewers treat them as such.
Record non-project time too. An apportionment is credible only if the denominator is real. Entries for sales support, general management and administration show that the claimed share was measured, not assumed.
Keep the raw record. Export the timesheet data at period end and store it with the register.

What goes wrong: the same round number for everyone, records created after the claim was drafted, and time logged to a project after its uncertainty was resolved.

Cost coding in the ledger

Add a project dimension to the chart of accounts, or a tracking category in the accounting software, and apply it at the point of entry, so that a schedule of costs by project and category falls out of the ledger. Capture these facts as costs arrive; each is tested by at least one scheme and all are hard to find later.

Cost type	Record at the point of entry	Why it is tested later
Payroll	Employee, project code, time share from the timesheet, employer contributions	Apportionment is the most common review question; several schemes limit or exclude amounts for owners and directors.
Contractors and agency staff	Who did the work, where it was physically done, whether the contractor is connected to the company, what the contract says about who owns the results	Most schemes limit the qualifying share of contractor costs, restrict work done outside the country and let only one party claim.
Materials and consumables	Project code; consumed in testing, or incorporated into a product that was sold	Items incorporated into products sold are excluded or adjusted in several schemes.
Grants and customer funding	Project funded, amount, the agreement and its terms on ownership and risk	Reduces, excludes or claws back the benefit in most countries (Module 3).

Setup checklist

What	Tool	Owner	How often
Project register: code, name, uncertainty sentence, competent professional, dates, status; the same codes in the issue tracker and repository	Spreadsheet or wiki page; labels or epics in the existing tracker	Technical lead	When a project starts, changes or ends; reviewed at each board meeting
Time records by project code and activity	Timesheet feature of the payroll or project tool, or a shared sheet	Each engineer; finance checks completeness	Weekly entries; monthly check
Project dimension in the ledger	Tracking category in the accounting software	Finance lead or bookkeeper	Set up once; every entry
Contractor file: location of work, connection, ownership and risk terms	Folder with the signed contract	Finance lead	When a contractor is engaged
Grant and funding file: agreement, amounts, project funded, tax treatment in the offer	Folder per agreement	Founder or finance lead	On signing and on receipt
Evidence: experiment notes, test results, design decisions, failed approaches	Engineering wiki or tracker, linked to the project code	Each engineer	As the work happens; summary at each milestone
Period-end export of timesheets, register and evidence index	Archive with the year's accounts	Finance lead	Each year end

Illustrative example

Illustrative example. Harbour Robotics Ltd, a hypothetical company, has five engineers and total staff costs of 100,000 in its first year. In month one the technical lead opens a project register with two entries: SLIP, detecting gripper slip on wet surfaces at production speed, and DASH, a customer dashboard built with the company's usual web stack. Engineers log time weekly against SLIP, DASH and three non-project labels. At year end the logs show 60,000 of staff cost against SLIP and 25,000 against DASH.

DASH involved no technological uncertainty, because the dashboard used known methods, so it is excluded without argument. Within SLIP, activity labels show 10,000 of time spent fixing faults in the shipped release after the uncertainty was resolved, which is excluded too. Eligible staff costs are 50,000, and the benefit is 50,000 at that country's rate. Without the logs, a year-end guess of 70 percent across all engineers would have put 70,000 into the claim with nothing to support it.

Across the seven countries

Country	Records expected
United States	Records that link each business component to the four-part test and to the wages, supplies and contract research costs you claim.
United Kingdom	Project records that show the advance sought, the uncertainties and how the work resolved them, and which competent professionals judged the uncertainty.
Ireland	Records made at the time that show the scientific or technological uncertainty, the work carried out to resolve it and the expenditure incurred.
Canada	Records made as the work happens, such as hypotheses, test results and time records, that show the systematic investigation.
Australia	Records that show the hypothesis, the experiments, the results and the conclusions for each registered activity, and that link expenditure to those activities.
New Zealand	Records that show each core activity, the uncertainty it addresses and the systematic approach taken, and link expenditure to it.
Singapore	Documents that show each project's objective, its novelty or technical risk, the work done and the qualifying expenditure.

Module 2: Setting up from day one