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R&D Tax Credits: Should I Claim With a Specialist?

There are lots of R&D Tax Credits specialists nowadays. But should you use one for your R&D Tax Credits claim? And how do you know which specialist is right for you? Here are some of the things you should consider when making this decision.

Claiming R&D Tax Credits is a great way to raise more money for your business. 

In the 21 years it’s been running, the R&D Tax Credits (aka R&D Tax Relief) scheme has paid out over £34 billion in tax relief and cash credits across over 470,000 applications.  

Micro, small, medium and large companies can all make claims. And businesses from any industry can be eligible. So long as they meet HMRC’s criteria for qualifying research and development

But while R&D Tax Relief is clearly a generous and largely accessible inititaive, it is also filled with complexity and nuance. This is why many companies choose to hire an R&D Tax Credits specialist to handle their claim.

Still, using an R&D Tax Credits specialist isn’t for everyone. 

So, in this blog, we’ll look at the five main reasons why companies use R&D Tax Credits specialists. 

We’ll also explain the factors you should consider when evaluating whether it’s a good idea for you to use a specialist.

And the criteria you should use for judging whether a specialist will truly add value to your business. 

Reason 1: Time is money. Money is time.

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 time, as we all know, is money.

Preparing an R&D Tax Credits claim can be a lengthy process. 

First, you need to work out which parts of your development work qualify for the scheme

The government’s eligibility criteria are deeply complicated. The official guidelines list no fewer than 43 conditions that need to be met and run to 12 pages

So the self-qualifying your R&D can take a while. And 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, spanning multiple teams or business units. 

Finally, if you want to reduce your chances of an HMRC enquiry, you need to write a technical narrative.

A few working days or a few working weeks

How much time this all takes 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 a few working days. 

Of course, even one working day worth 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. 

An entire working week or more, in fact. 

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 are being sacrificed?
  • How valuable is your team’s time? 

In many cases, the answers to these questions will make the fees an R&D Tax Credits specialist will charge well worth the investment. 

Now, you might be wondering whether you can’t just ask your regular corporate accountant to file R&D Tax Credits for you? After all, getting them to do it would also save you time.

We’ll cover this question in a few places. But if you want to read a more detailed answer, you can read our dedicated blog on the subject.

Reason 2: Access 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.  

When HMRC’s tax inspectors judge whether you are eligible for R&D Tax Relief, they look at whether your research and development work meets the government’s criteria for qualifying innovation.

They often do this by looking at your technical narrative.

What is a technical narrative and why does it matter?

A technical narrative is a two-to-five page document in which you explain your development work and how it meets the scheme’s criteria. 

You don’t have to submit a technical narrative. Though the government is considering whether to make them a mandatory part of the claim process.

However, filing a clear and well-worded technical narrative will significantly improve the chances that your claim is accepted quickly. And dramatically reduce your chances of facing an HMRC enquiry or compliance check.  

Your technical narrative should be written 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 a more generalist corporate accountant can’t offer you. 

Of course, if you have conducted your R&D in-house, you probably have a good amount of technical expertise at your disposal. 

Still, there are two things to consider. The first, as we mentioned, is how much time they have to spare to write a relatively lengthy document. 

The second is whether they are well suited to writing your narrative. 

Here’s what we mean. Because HMRC’s tax inspectors, which are not usually technical, need to be able to understand your narrative, it should ideally be written by someone who can translate complex technologies and ideas into simple English.

This is a difficult skill, which is why there are so few really good science communicators. 

Nevertheless, it’s one that GrantTree’s technical consultants have honed to a tee.

Reason 3: Maximise your funding

Another thing an R&D Tax Credits specialist will do is help you maximise the amount of money you’ll receive from the scheme. 

They will do this in two ways. 

First, their technical specialists – if they have them – will identify all of the development work you have conducted that are 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: Reduce your risks

A 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 when it needs more information about your company and development work to determine whether you’re eligible for R&D Tax Credits. And whether your claim size is accurate. 

Companies with large and/or complex claims are more likely to face an enquiry. Though all claims are susceptible to some degree. 

Enquiries/compliance checks are troublesome for several reasons. 

For one, 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. Around 60 hours, usually. But they can take much longer. 

In addition, there’s a good chance that an enquiry will result in HMRC rejecting some of your projects, reducing your windfall. 

In some extreme 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 best way to avoid them is to file an accurate, fully-compliant claim. And to corroborate and defend it with a watertight technical narrative. 

The easiest and least stressful way to do that is to harness the experience and expertise of an R&D Tax Credits specialist.

Reason 5: Enquiry defence

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 queries as quickly and thoroughly as possible. 

Doing this well can speed up the enquiry process by reducing the chances the agency will come back looking for more information. 

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. 

Also, 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 can be a sign that they don’t have much confidence in the claims they’re compiling on behalf of their clients. 

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 Advance Funding service, we can advance you up to 80% of your payable tax credit up to six months before your year-end. 

That’s six 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 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!