Some goods or services are paid up front as a pre-payment. In general pre-payments are not eligible as R&DTI expenditure. However one of the small business concessions is that if a service is to be provided within the next 12 months, then it is allowed for those entities to include prepaid invoices in R&DTI expenditure, as long as the activities on which the amounts will be spent (and the type of expenditure itself) meets the eligibility rules.

Its important to note that the prepaid activities have not yet occurred, but reference to them should be included in the application form.

If the prepayment is for materials, then be aware that if a feedstock adjustment applies, the trigger year (when the product in which the materials are incorporated is valued or sold) is likely to be a later year so this consideration covers multiple years.

Keeping careful records of what materials have been claimed and what happens to the outcome of the R&D activities is very important.