As specialists in Research & Development (R&D) tax relief, THIS R&D can help you to realise a benefit that an incredible is often missed. R&D tax relief is a measure introduced by the government over 20 years ago as part of an initiative to encourage scientific and technological innovation within the UK. However, the industry is largely unregulated and worrying practices have recently sprung up which have resulted in a number of claims being overstated, and may significantly increase your risk of an inspection by HMRC.
MAINTAINING STANDARDS IN AN UNREGULATED INDUSTRY
At THIS R&D, we're concerned that some business decision makers are not aware of this lack of regulation and we're passionate about upholding the standards we believe should be guaranteed when it comes to businesses seeking and receiving tax relief advice. On this page, we share our 5 key points to consider when choosing a tax adviser and why trust and transparency are key to ensure you minimise your future risks.
"Some business decision makers do not know the industry is unregulated"
INCREASING AWARENESS OF RELIEF
THIS R&D are focused on increasing awareness of R&D tax relief, as well as delivering maximum possible value to those eligible, always within the spirit, not just the letter of the law.
We believe claiming this relief is a catalyst for growth and we're keen that as many businesses as possible realise their eligibility. It is available to companies seeking to research or develop an advance in their field, or having to spend time overcoming technological challenges, and can even be claimed for unsuccessful projects.
"THIS R&D's rate of HMRC investigations is currently 0%"
When seeking any tax advice, it is critical to ensure you find a reputable advisor who is experienced and follows HMRC's frameworks and guidance. There is increasing evidence of spurious advisers making unsubstantiated claims in terms of their records of success. This report shares guidance on how to avoid overblown marketing claims and statistics that may lead to engagement with disingenuous advisers, which could significantly increase your risk of becoming the subject of an HMRC tax inspection.
"Having a well drafted technical report can reduce HMRC's opportunity to investigate."
THE BENEFITS OF CLAIMING R&D TAX RELIEF
An R&D tax relief claim can be made by any UK-based company carrying out qualifying activities.
An incredible number of businesses are not claiming when they could be. R&D tax relief can either reduce your corporation tax liability, or, in certain cases, result in a payable tax credit. As this increases cash to be spent in the business, it can also benefit the economy as a whole, which has led to it being a specific focus for the government in recent years. What constitutes a qualifying R&D spend is often misunderstood but, in general terms, if your engineers or technical teams spend time improving products or processes or developing solutions to technical problems, this can qualify.
The 'Making A Claim' page on our website gives examples of qualifying activities by industry sector but we are also able to determine the likelihood of your business qualifying during a quick 15-minute phone call.
THE RISKS OF WORKING WITH THE WRONG ADVISER
Concerns over increasing abuse of R&D tax reliefs has caused the National Audit Office (NAO) to extend the qualification of HMRC's 2019-20 accounts. There are reports of 'boundary-pushing' leading to unfair rewards for businesses who do not qualify for R&D tax credits. This means there is likely to be more inspections related to R&D tax relief. In addition, upcoming changes are likely to expose this, including digital claims, that are likely to require more detail, greater endorsement required from senior officers within organisations.
THE BENEFITS OF WORKING WITH THE RIGHT ADVISER
None of these more stringent requirements are a problem if you are working with ethical, authentic advisers like THIS R&D. We already provide over and above the statutory minimum in terms of backup information for our R&D tax relief claims. In particular, we produce a technical report to accompany every claim. It is important that you familiarise yourself with technical reports and understand why they are critical to submitting a complete and transparent claim. The technical report shows HMRC that the R&D work your company has undergone meets the criteria set out in the BEIS (Department for Business, Energy and Industrial Strategy) Guidelines.
As a result of always completing technical reports, we are proud that our rate of investigation from HMRC currently stands at 0%. To date, our clients have never been investigated as a result of their claim for R&D tax credits.
"It was an absolute pleasure to work with the team at This R&D. They were recommended to me by a friend who had managed to get a successful R&D claim from the HMRC. I wasn't even aware that the dispensing robot that I had installed in my pharmacy would be eligible for a R&D claim. The amount of effort I needed to put in was minimal. Just had two one-hour conversations over Zoom and an hour at the most to get the information ready. They are very knowledgeable and maximised the claim. I would thoroughly recommend THIS R&D." - Managing Director, Lincoln based Pharmacy Group
"We weren’t aware of the R&D scheme previously until we discussed it with “THIS R&D” who reviewed our works and a case study and advised us swiftly of the process and the potential for a successful claim. In a short space of time we were successful with a claim in excess of £40,000 which was an amazing result and we are shortly reviewing our next claim and have already recommended them to other business owners in our contacts list. There really is nothing to lose and all to gain" - Director, Commercial Chartered Surveyors
5 Key Points To Consider When Claiming R&D Tax Relief
These shouldn't feel as though you are over-spending but should feel as though you are paying for a quality service, delivered by experienced, ethical advisers.
You get what you pay for so it's worth doing some research at this stage. Reputable tax advisers will always be willing to chat before they contract with you so ask questions about their approach and who else they've done business with.
Check their reviews and score on TrustPilot. Our score is currently 4.6/5, of which we are immensely proud.
It's important to focus on quality and that means experience. Who is on the team that will be dealing with your claim? On that matter, there's a new kid in town: AI.
You may have seen increasing adverts online from tools which claim to be able to produce reports using AI software. There's simply no way it would be possible to produce a report of a standard that would be of any use. Granted, technology is continually advancing but currently software cannot outperform the 20+ years' experience that our tax partner, Tom, brings to the table.
It's also worth asking whether they will complete the work in-house or whether they outsource.
3. Insurances and accreditations
Look carefully at the credentials of any advisers you plan to work with. Although the industry itself is not yet regulated, reputable advisers will have their own accolades, terms and conditions and sufficient detail as to what they deliver, to put your mind at rest.
4. The presence of a technical report
These will become mandatory from April 2023 when the process becomes digital, so we feel it's worth ensuring one is included in any service you agree now.
A well written technical report reduces the chance of an HMRC enquiry because it provides backup to the tax return figures and explains why the work qualifies for the relief. It means everything is fully disclosed and, most importantly, this disclosure can reduce the opportunity for HMRC to open an enquiry into the claim from 4 years to 1 year.
5. Your reputation
Most importantly, remember that anyone you do business with can impact your own reputation. Spurious advisers who are pushing boundaries are far more likely to bring your business to the attention of HMRC. If an investigation takes place, this can easily cross over to your entire financial affairs and, while you may not have anything to hide, it will use a considerable amount of time and resource to gather data and provide evidence to answer the questions asked. From 2023, firms will be required by law to declare the name of their tax advisers.
R&D TAX RELIEF - THINGS TO CONSIDER
R&D tax relief is such a good opportunity for firms that qualify, we're struggling to understand why advisers feel they need to 'cook the books'. We've outlined below the two schemes available, depending on the size of your organisation.
Gives additional tax deduction of 86% of the qualifying costs (so, a total of 186%) (130% and 230% respectively prior to 1 April 2023)
Provides an additional tax saving of 21.5p for every £1 spent (86% at the tax rate of 25%) (previously 24.75p, being 130% at the tax rate of 19%)
Loss-making companies can surrender up to the entire 186% (previously 230%) for cash at a rate of 10% (previously 14.5%), thereby receiving up to 18.6p (previously 33.35p) of cash for every £1 spent
Larger businesses are defined as those where the entire worldwide group has over 500 employees and either turnover in excess of 100m Euros or gross assets over 86m Euros, and they are eligible for the Research and Development Expenditure Credit (RDEC)
- The RDEC is a 20% credit that appears within operating profit, thus increasing EBITDA. This amount is then subject to tax at 25%, and so the net benefit is 15p for every £1 spent
- Prior to 1 April 2023, the RDEC was a 13% credit was subject to tax at 19%, and so the net benefit was 10.53p for every £1 spent
Having an R&D tax policy means SMEs can grow more quickly as the money allows them to reinvest and keep innovating. It's a generous tax policy and worth taking advantage of if you're eligible. However, it's not worth being taken advantage of as a business, by working with unscrupulous advisors. The NAO believes that over £300m of R&D tax credits are claimed fraudulently or in error each year. As a result, HMRC have recruited an additional 100 compliance officers to investigate possible R&D tax fraud.
WHAT TO WATCH OUT FOR
Spurious advisers will be trying to gain lots of clients, quickly. Equally, they are likely to take shortcuts with your claims, offering a sub-standard service and enticing you with claims such as: "We have a 100% success rate"
A 'successful' claim would be one that HMRC had either already investigated and then okayed, or one where they had confirmed they would never investigate. This is the stuff of fairy tales. 100% success is not a valid claim. The closest you can get to this in reality is that, as an adviser, you've never been challenged for a claim because your work is robust, evidenced and trusted. A bit like ours at THIS R&D.
While reputable advisers will do everything within their power to mitigate the risk of an HMRC enquiry, it remains an eventuality that cannot always be avoided.
The assurance you need is that the process undertaken is ethical and the paperwork always complete and robust to back up assumptions and reinforce the claim itself. That's low risk, but not risk free.
"We'll get you more"
If you've never claimed before and this is someone trying to win your business, think of the archetypal used car salesman, the estate agent who says "we're the cheapest" and remember that those who over promise often under deliver.
"Cheaper than the competition"
Beware any claims about 'cheap' or 'cheapest'. As with many areas, quality and experience is critical when you are outsourcing your financial affairs.
Cheap almost always implies that corners are being cut. Or perhaps they are excluding some of the paperwork, like the technical report mentioned earlier. These aren't yet compulsory for every claim but we believe they are best practice and would never submit a claim without one.
Our fees are around 15-20% because every report is bespoke, all have a full technical report written specifically for your business* and we guarantee to defend any claim that does attract an enquiry.
*It probably won't surprise you to learn that some of these 'highly successful, 'cheap' advisors have been found to use generic technical reports, copied and pasted from business to business.