Using an R&D Tax Credits specialist can save you time and money, and reduce your risks of facing a lengthy HMRC investigation. But they aren’t for everyone.
Since it launched more than 20 years ago, the R&D Tax Credits scheme has paid out over £34 billion in tax relief and cash credits to innovative UK businesses, accepting over 470,000 applications.
However, while it is both generous and largely accessible, R&D Tax Relief is also filled with complexity and nuance. Filing takes time. Making mistakes can land your company with a fine or lengthy HMRC investigation.
To avoid these and other issues, many companies hire an R&D Tax Credits specialist to handle their claim.
Still, using an R&D Tax Credits specialist isn’t for everyone. In this blog, we’ll look at the five main reasons companies use R&D Tax Credits specialists.
We’ll also explain the factors you should consider when evaluating whether it’s a good idea to use a specialist. And the criteria you should use for judging whether a specialist will add value to your business.
Reason 1: Save time, money and hassle
One of the biggest advantages of using an R&D Tax Credits specialist is that it will save your company a great deal of time. And, as we all know, time is money.
Preparing an R&D Tax Credits claim can be a lengthy process. You need to work out which parts of your development work qualify for the scheme.
The government’s eligibility guidelines are long and complicated, listing no fewer than 43 conditions companies must meet to qualify for funding.
Self-qualifying for R&D Tax Credits can take a while. There’s a lot of room for error, especially if your technical work is complicated or involves lots of projects.
Then you need to identify all of your costs that are eligible for relief. And apportion them correctly. This can be made harder if your work involves many different forms of expenditure and spans multiple teams or business units.
Additionally, the process of preparing a claim has become much more time-consuming, now that HMRC has introduced the additional information form, requiring all applicants to provide much more detail about the financial and technical aspects of their development work.
A few working days...or a few working weeks
How much time it takes to file for R&D Tax Credits without a specialist varies from company to company.
For businesses that catalogue their R&D work and expenditure throughout the year and that have financial and technical personnel to spare, it may only take working week or so.
Of course, even one working day of a developer or engineer’s time can be pricey—both in terms of their salary and the opportunity cost.
Meanwhile, for companies that don’t keep detailed records of their R&D work, have busy teams focused on other projects, and don’t maintain good lines of communication between their various departments, the process can take much longer.
When thinking about whether it’s worth it to hire outside help, consider the following:
- Have you filed for R&D Tax Credits successfully before?
- How much time do you and your team have to dedicate to filing?
- What other projects will receive less attention? How important are they?
- How valuable is your team’s time?
In many cases, the answers to these questions will determine whether an R&D Tax Credits specialist offers value for money.
Reason 2: Bolster your claim with technical expertise
Another advantage of using an R&D Tax Credits specialist is that some of them – though not all – will add technical expertise to your claim.
R&D Tax Credits is a form of corporate tax relief. So, of course, claiming it involves a lot of financial analysis and calculation. But technical knowledge is just as important.
From 8 August 2023, all companies have to submit an additional information form containing an array of technical data about their projects, such as what advance they were trying to achieve and what uncertainties they encountered.
HMRC uses this information to judge whether your project satisfies the government’s definition of qualifying R&D.
The technical information in your additional information form should be prepared by someone with a technical background. Someone who can understand your development work and its implications. And then interpret it in terms of the government’s eligibility criteria.
This is something most accountants can’t do.
Of course, if you have conducted your R&D in-house, you probably have a good amount of technical expertise at your disposal. But before using your technical team to prepare the technical aspects of your additional information form, consider:
- The value and availability of their time
- Whether they are well suited to this task
HMRC’s tax inspectors, who are not usually technical, need to be able to understand the information in your form. So it should be written by someone who can translate complex concepts and ideas into simple English.
This is a difficult skill, but one that GrantTree’s technical consultants have mastered.
Reason 3: Maximise your funding
First, their technical specialists – if they have them – will identify all of your development work that’s eligible for R&D Tax Relief.
To do this, they may interview your technical team, analyse your prototypes or visit your premises. This thoroughness will help them spot areas and projects you may not have realised would qualify for relief. The more work the technical team identifies, the larger your claim is going to be.
Of course, you don’t want your development team to be spending hours answering your R&D Tax Credits provider’s questions. That’s why it’s important to work with companies that work hard to minimise your workload and that have established, field-tested procedures in place to extract as much information as they need in as little time as possible.
At the same time, the specialist’s financial team, using their in-depth knowledge of company operations and the R&D Tax Credits scheme, will scour your records to identify every penny of expenditure connected to this development work.
With HMRC allowing companies to claim for a range of costs, including sums connected to both direct and indirect activities, it’s not always easy to understand which expenditure is eligible for relief. This is why many companies neglect to claim their full entitlement. Or deliberately underclaim to avoid trouble with HMRC.
The financial specialist will also account for the many intricacies of the R&D Tax Credits scheme, like the PAYE Cap.
Speaking of avoiding trouble with HMRC…
Reason 4: Get peace of mind by limiting risk
The fourth advantage of using an experienced and qualified R&D Tax Credits specialist is that it can significantly reduce your risk of facing an HMRC compliance check. Plus other penalties, like fines.
A compliance check – also known as an HMRC enquiry – is essentially an investigation into your R&D Tax Credits claim.
HMRC launches an enquiry if it needs more information about your company and development work to determine whether your claim is accurate and that you’re truly eligible for R&D Tax Credits.
Enquiries/compliance checks are troublesome for several reasons. They can delay your R&D Tax Credits windfall for months or even years. They also damage your relationship with HMRC and take a long time to resolve.
There’s also a good chance that an enquiry will result in HMRC rejecting some of your projects, significantly reducing the amount of funding you receive. In some cases, an enquiry can lead to hefty fines.
How can I avoid a compliance check?
So, all in all, HMRC enquiries are bad news. They are difficult, delicate and resource-consuming.
Thankfully, are a number of things you can do to avoid a compliance check. Here are four tips from Dr Chris Brown, one of GrantTree’s R&D Tax Credits specialists.
But the easiest and most efficient way to do that is to harness the experience and expertise of an R&D Tax Credits specialist.
Reason 5: Enquiry defence (if you need it)
R&D Tax Credits specialists can also add a lot of value if HMRC launches an enquiry against your claim.
When facing an enquiry, the key is to answer HMRC’s questions as quickly and thoroughly as possible.
Doing this well reduces the chances the agency will come back looking for more information, speeding up your compliance check.
An experienced R&D Tax Credits expert knows how to navigate this. They’ll be able to analyse your claim, deconstruct HMRC’s questions, and prepare a comprehensive response without delay.
HMRC will often want to interview members of your finance and development teams as part of the compliance check. An R&D Tax Credits consultancy will be exceedingly helpful, in that case.
Their finance and technical experts will coach your team on how to answer the inspectors’ questions. They will also explain what data and details will be most relevant on the call.
Get enquiry defence for free
R&D Tax Credits providers will charge a fee if you use them just to defend your claim against an enquiry.
However, if you also use them to file your claim in the first place, they will often offer enquiry defence free of charge.
If your provider doesn’t offer free enquiry defence, it could be a sign that they don’t have much confidence in the claims they’re preparing.
Perhaps because they’re not investing as much time and attention into compiling their clients R&D Tax Credits claims as they should.
In which case, it might be a good idea for your business to look for a provider who does offer free enquiry defence. Especially now that HMRC enquiries are on the rise.
Bonus Reason: Get your R&D Tax Credits early
Another bonus of using GrantTree as your R&D Tax Credits specialist is that we can help you access your cash windfall long before you’ve filed your claim.
Through our R&D Advance Funding service, we can advance you up to 80% of your payable tax credit up to nine months before your year-end.
That’s nine months more to use your R&D Tax Credit to invest, hire and grow your business.
And if you choose to invest your windfall back into development work, you’ll also receive a larger tax credit when it comes time to file.
You can learn more about our R&D Advance Funding service here.
Conclusion
Working with an R&D Tax Credits specialist can yield a variety of benefits for your company. As a quick recap, they are:
- Save your company money and time
- Receive much-needed technical expertise
- Increase your R&D Tax Credits claim size
- Reduce your chances of facing an HMRC enquiry
- Save time and protect your claim size with free enquiry defence
If you are interested in learning more about using an R&D Tax Credits specialist or would like to get the ball rolling on your claim, just get in touch. Our team would be happy to help you!
