The Benefits of Taking R&D Tax Advice
R&D tax credits are an invaluable financial aid that can provide a lifeline for those in the manufacturing and engineering sectors, but is often overlooked by those operating in fields where their eligibility is not quite so obvious. Companies can avoid missing out on potential returns or over-claiming by seeking professional advice.
An accurate claim requires more than just knowledge of the scheme. Many companies make the common mistake in believing that because it has “tax” in the title R&D tax credits are best left up to their accountant. Unfortunately, in this instance wisdom runs contrary to popular belief.
The starting point is to ask the question ‘Are we really doing this in the most time-efficient and beneficial way possible?’ The key elements of the process are:
1. Identifying which of your technical activities are eligible
2. Quantifying eligible expenditure in line with the legislation
3. Submitting the claim and managing any additional actions from HMRC
The answer depends not only on the size of the claim, but also the way in which it is prepared for HMRC. Often clients make sizeable claims, but in the process invest far too much time on unnecessary detail and comprehensive documentation. Once internal costs have been accounted for, they realise that they could’ve spent that time more profitably elsewhere.
Conversely, some clients attempt to skimp on claim preparation time and hope to ‘claim just for the lion’s share’. This can lead to cases where the claim is either far smaller than it should be, or is large relative to company size but unsupported by sufficient detail – and this can incur issues with HMRC’s specialist R&D inspectors.
The Benefits of outsourcing to specialist consultancies
Working with a true specialist with knowledgeable and experienced people will almost certainly minimise the time and effort for you. R&D tax relief can be complex and time consuming, but if you choose the most appropriate approach and advisor it can be highly worth your time, but consider your options carefully.
When considering taking professional advice on R&D tax credit it’s important that companies think about the nature of support and the level of support they will get from their adviser:
- Companies have to be aware that service providers approach the process differently, each has their own approach and the approach can have a profound impact on the results. Not even all R&D tax advisers provide the same service.
- Companies should ask some pertinent questions through the selection process, to identify just what level of service and support they will be getting:
- Be sure to ask about track record, and the training and credentials of the people who’ll be representing you to HMRC. All will position themselves as ‘experts’, but only a few will routinely do enough claims per year to justify the title of specialist. While it can be tempting to choose the cheapest rate available, the savings will be negated if your staff members are expected to identify all of the eligible expenditures without sufficient guidance, write the majority of the justification documents, or if your claim goes into Enquiry due to errors or, even worse, misrepresentations of your activities.
- Does the service provider understand the technical aspects of the company’s R&D activity? And do they understand the context of a company’s technical activities? While an accountant will be more than competent in dealing with all general aspects of a company’s general finances very few have the technical knowledge to feel confident in conversing with technical staff. Trained and technically qualified consultants not only understand the technical complexities of R&D activity and processes but can add to the discussion and analysis and provide a detailed objective assessment of the level of eligibility in identified activities
- Companies also need to ask where the responsibility for a claim rests. Most accountants, because of their lack of technical understanding require the claimant to write the technical supporting document and consequently, the responsibility for accuracy and validity of the claim will come back on the claimant themselves. The right advisory firm takes full responsibility for writing the report and consequently for its content
- Finally, will the adviser field and answer technical questions from HMRC? While enquiries from HMRC are not a bad sign, answering their questions can be time consuming and distracting. By choosing an advisory service with technical expertise this part of the process can effectively be out-sourced to the experts
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"The Benefits of Taking R&D Tax Advice?" First published on Company Connecting July 2018