A common question businesses have when deciding how to approach their R&D Tax Credit claim is “should we go with a specialist or with our own accountant?”. Here’s our advice.
Accountancies often roll R&D Tax Credits into their service, so many people don’t see the value in having another agency handle their R&D claim.
This is a tricky decision to make. People naturally trust their accountant, so they often find themselves hesitating between these two choices. Or sticking with what they know.
This is not made easier when the trusted accountant says something about R&D Tax Credits and the specialist firm contradicts it.
This article will explain where a specialist can add value to your claim.
Sometimes you need a GP … sometimes you need a surgeon
Accountancies, by nature, need a wide breadth of knowledge of about the various tax breaks and initiatives on offer.
However, as is so often in life, you can’t be everything to everybody. Accountancies are like the GPs of the tax world: they know their area very well generally, but they have so many bases to cover that they often have only the most superficial understanding of R&D Tax Credits.
R&D Tax Relief specialists, meanwhile, are like surgeons. They are very experienced with a niche topic that they know in and out.
R&D Tax Relief is a complex field where depth of experience makes a big difference. Eligibility for the scheme is not clear-cut. And the qualifying costs can change year on year, making it difficult to keep up to speed with what you can claim for.
But this is specialists’ bread and butter. They are up to date not only on qualifying costs but also have the experience and know-how to identify how best to present the projects to maximise your claim.
If you are ever in doubt about whether you are eligible for R&D Tax Credits, it’s often best to contact a specialist for a free eligibility check.
It costs nothing but some time. And it can give you a definitive answer which your accountant may not be able to provide.
Technical know-how goes a long way
R&D Tax Relief is a complex scheme. One with innumerable grey areas and edge cases.
Even the few accountants who have some understanding of R&D Tax Credits are unlikely to have sufficient understanding of the scheme to maximise your claim. Nor the technological know-how to write a kick-ass technical narrative.
Perhaps even more importantly, very few accountants will be able to defend your claim, from a technical perspective, from an HMRC enquiry.
Enquiries are time-consuming and expensive to resolve. So, enquiry defence should be an important factor when deciding whether to use a specialist or an accountant for your R&D Tax Credits filing.
GrantTree and other specialist companies will often have expert technical writers whose job is to understand all the nuances of your projects and then present them in a way HMRC can understand. The writers will also be familiar with how to best defend an R&D application to maximise your claim.
As a simple example, a manufacturer who develops and sells remote-controlled toy helicopters could disqualify themselves by declaring that their project was to develop new toys.
HMRC may take the time to tease out the underlying innovation, but they often won’t. If they push back, the discussion could easily end up disqualifying all the work, if the manufacturer doesn’t know how to handle an R&D Tax Credit HMRC meeting.
Conversely, if this same manufacturer filed a claim focusing on the technologies they’ve had to develop and tune (remote control, aerodynamics, balancing, battery, integration of components), they would probably sail through without issues.
Accountants can’t and shouldn’t be expected to be experts in technology. That’s not their job.
Unless they specialise in R&D Tax Credits and have a technology background relevant to your industry, you should check with a specialist before taking their word that you don’t qualify.
They may be right, but given the amounts at stake, it’s certainly worth getting a second opinion.
Bigger isn’t always better
Some companies we talk to are using a big practice, and so they think they’re covered in terms of tax.
It’s absolutely true that Deloitte, Grant Thornton, and other large accountancies will have R&D Tax Credit experts on board who know the scheme inside out.
However, it’s also true that most of the staff at a large accountancy won’t know much about R&D Tax Credits. Whether you get good R&D Tax Credits service will depend on who you talk to.
They also won’t be cheap, and probably won’t bother filing R&D Tax Credits for you until the amounts get really large and worthwhile for them.
In one case we encountered, a highly technical company that was spending over a million pounds a year on qualifying R&D (and had been spending similar, increasing amounts, for over ten years), was with a large accountancy, who had not told them about R&D Tax Credits.
We estimated that they had lost over a million pounds of tax rebates by not filing. And that was only counting the accounting years which were further than 2 years back, which could no longer be claimed for.
So when in doubt, ask and ask again.
If you are unsure about using a specialist for R&D Tax Credits and want to have a free qualification, or just want to ask us a question about the R&D Tax Relief service in general, just get in touch. We would be happy to help.