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Connecting Xero to Novel

Step 1

Navigate to your Novel organisation page and select the Apps tab at the bottom of the sidebar. When on the Apps page, you can connect your organisation to Xero.

Step 2

Selecting Connect to Xero will redirect you to Xero’s website which will list the organisations within your Xero account. From here you will be able to authorise Novel access to an organisation of your choice and see what permissions Novel is asking for.

Step 3

If you only have a single company within your Xero account, it will automatically be added to your chosen Organisation in Novel. If you have authorised multiple companies within your Xero account, you will be presented with a screen to choose which company you would like to connect to your Organisation in Novel. This area will display the company name, registration number and is searchable.

Step 4

Once connected the Apps page provides you with the details of the Xero company you have added. Here you will also have the option to remove your access, or if you are the admin of the Organisation in Novel, you can also remove the connection between your Novel Organisation and the Xero company. This page will display the name and registration number of the connected organisation and will also detail the Xero ID for that organisation.

xero_novel_integration

Step 5 – Xero connection management

Since you may have multiple Organisations within Novel it may get a bit confusing as to the connections that you have made or you may forget over time. We have added all current connections to a centralised panel in your profile section, which can be accessed via name in the top right-hand corner. Here you can monitor which authorisations you have made and also remove or disconnect any authorisations between Xero and Novel that you no longer require.

Step 6 – Xero use within Novel

Now that you have connected Novel and Xero, you can simplify the inclusion of your costs for your R&D tax relief claim.

When in the Financials sections of an organisation you will be able to add costs to your claim to the following R&D tax relief cost categories:

  • Subcontractors
  • Externally Provided Workers
  • Consumables
  • Software Costs
  • Clinical Trial Volunteers

When you click to import costs from Xero you will be presented with all costs in a claim period that are allowable for R&D, these are:

  • Direct Costs
  • Overheads 
  • Expenses

Your first import may take a little while, please allow a few minutes for this, but when it’s complete you will be presented with a table of these costs.

You will see this loading screen whilst waiting for costs to be imported.

These costs can be filtered by the Account type. Select the costs you wish to import and then these will appear imported into your claim. Complete the missing data required for an R&D claim and then save, the costs will be shown with a Xero badge so you will know if something is imported or added manually to a claim, and from where.

As you are adding costs to your claim throughout the period you will be able to resync the data with Xero to import any new data into Novel. This process will be much quicker than your first import.

An empty Costs table detailing that you can import costs from Xero
Novel, R&D tax relief, task tab (1)

How to use the Tasks section?

Love them or hate them, task lists are a great way to stay organised. We’ve all had that sinking feeling when we realise we didn’t remember to include something important. Forgetting to include an important piece of information could be the difference between having a successful claim or getting an inquiry from HMRC and being refused relief.

There is a lot of important information that needs to be included and we recognised that knowing which details are crucial can sometimes feel overwhelming, and the Tasks tab is there to guide you through it.

The Tasks tab in Novel is a blend between a project management tool and a to-do list, which shows your R&D claim progress and different categories of tasks to ensure you are doing everything correctly. Let’s dive deeper into where to find the Tasks tab in Novel and how to use it.

The Tasks section

1. You can find the Tasks tab in your left hand Navigation

2. This opens up the Tasks page in Novel, where you can see different types of tasks broken down into general tasks and claim specific tasks.

3. Tasks are broken down into Must do and Should do tasks. Must do tasks are all tasks that are necessary in order to submit your R&D tax relief claim. You will not be able to finalise your R&D claim within Novel without completing all the General and claim specific Must do tasks. Should do tasks are a nice addition to your claim and help it be more robust, but they are not required.

Tasks that have already been completed will have a checkmark next to them.

3. General tasks provide an overarching view of your business, such as your company description, field of R&D and UTR. In the case of completing a compliant R&D tax relief claim, these are all required, which is why you see them in the Must do column. 

Novel, R&D tax relief software, task list, to do list, project management

4. Claim specific tasks are broken down further into tasks for two types of users:

  • Technical User Tasks provides information and explains the R&D activities
  • Financial User Tasks breaks down the costs that have been incurred in carrying out the work set out by the technical narrative

To learn more about what type of users these are, read our blog here or below.

The benefit of breaking down tasks between technical and financial users is to offer transparency to the claim preparation process by helping the team see what everyone is responsible for inputting into the platform. It also leads towards a more robust R&D tax relief claim because there is little guesswork involved because the users that are required to input the information are the people who have the relevant knowledge or carried out the activity.

Novel, R&D tax relief software, task list, to do list, project management

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How Do Accounting Periods Impact R&D Tax Reliefs?

R&D tax credits are a type of Corporation Tax relief; therefore, it’s tied to your accounting period. Generally, accounting periods are twelve-month long. If you just found out about R&D tax relief, the good news is that you can claim the credit retrospectively as well. The deadline to claim R&D tax relief retrospectively is 24 months from the end of your accounting period.

How do we deal with accounting periods in our R&D tax relief software solution Novel?

Novel integrates directly with Companies House so when you set-up your organisation on Novel, you will notice that we automatically populate the claim periods which you can claim for. Claim periods relate to the accounting periods of the business and your R&D claim will generally be aligned with these dates.

For established businesses, you will typically see three claim periods: current, previous and past. Ensure that your claim period and accounting periods correspond to what is on Companies House. If they don’t, you can manually edit the information in Novel.

The current account period can be used to track ongoing R&D through Novel. With R&D tax relief you can claim up to two years worth of retrospective R&D which is why you will also see two past accounting periods displayed in Novel. This means, if you just have found out about R&D tax relief and feel like you’ve been doing qualifying R&D work for a number of years, you can still claim relief for some of that work.

If you’re in your first year of business, you may only see your current accounting period. The first accounting period is usually slightly longer than twelve months, as the accounting period defaults to finishing on the last day of the month. For example, if you incorporate a company on 15 March 2021 then the first accounting period will run from 15 March 2021 to 31 March 2022. You can see an example of this in the screenshot below.

As a start-up business, you should be on the lookout for any expenses and begin recording the work that could potentially qualify for a tax deduction in Novel as soon as possible, especially if you are close to filing your Corporation Tax Return (CT Return). This will help create strong supporting documentation to be submitted to HMRC. 

After this point, an accounting period will usually span 12 months. However, businesses can either shorten or extend their financial accounting period to better fit their commercial needs. Keep in mind that when you extend your accounting period, you also extend when you are able to file your R&D claim as the claim is tied to your statutory accounts and corporation tax return, thus delaying when you can secure the benefit derived from claiming R&D tax relief.

Why is there a time limit of two years from the end of your accounting period to claim R&D tax relief?

R&D tax relief is a type of Corporation Tax relief, therefore the two year limit ties into the deadline for amending your Corporation Tax return, which is typically 24 months after the end of your accounting period. You won’t be able to claim back money on any qualifying R&D once you reach the two year cut off period, regardless of how long your accounting period was.  

How many months should I be trading before I can claim R&D tax relief?

To claim R&D tax relief, you need to have one full accounting period. For example, Novel is a software start-up by Optimal Compliance that officially launched in March. From the image below, you can see that Novel’s upcoming accounting period is from March 2021 to March 2022, therefore we will only be able to claim R&D tax relief for work done once 31 March 2022 has elapsed. This date will change if we choose to either extend or shorten this accounting period.

accounting periods, tax relief, novel R&D tax relief software

No need to put off making your R&D tax relief claim

If you are in a similar position as Novel in terms of your accounting periods, don’t be put off from setting your organisation up on Novel. Instead, you can use the software to track your ongoing R&D so when it comes to making your claim, you have the project’s facts and figures all written down.

The benefit of this is that it will increase both the quality and integrity of the claim, as you’re able to note down the particular technological/scientific problems that you’ve encountered in real-time, as opposed to looking back retrospectively. This in turn enhances the information you provide to HMRC and avoids any last minute rush for paperwork or supplementary information.

What if I have already filed my corporation tax return (CT600) for the period in which the qualifying R&D activities took place?

The short answer is yes. It is possible to submit an R&D claim as an amendment to the CT600. However, do make sure to include the amended Tax Computation along with the amended CT600, otherwise HMRC may not process the claim. Legislation dictates the time limits for amending Corporation Tax returns; this is currently two years after the end of the company’s financial year-end. In other words, it is possible to claim R&D tax credits retrospectively up to two years after the accounting year end date.

Do your next R&D tax relief claim with Novel

Generate HMRC-compliant R&D tax relief claims without the complexity quickly and efficiently in-house as well as take advantage of its suite of features: education content, financial aggregators that make complex calculations for you, and R&D tracking feature. 

Preparing R&D tax relief claims hasn’t been easier. 

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