Insight

6 Hallmarks of a Good R&D Tax Adviser

Take a look at the six hallmarks that make a good and reliable R&D tax adviser.
6 Hallmarks of a Good R&D Tax Adviser

1. Qualified Tax Adviser status

Is the R&D adviser a suitably qualified tax professional?  

Advice or support with making an R&D claim is tax advice. R&D tax credits are delivered via tax legislation, claimed on your company tax return, and overseen by HMRC. 

The onus is on the taxpayer company to make sure it gets things right, with HMRC now checking more than 20% of the claims it receives more thoroughly to ensure compliance. Seeking support and advice from a suitably qualified tax professional in relation to this tax relief will help you to get things right.

Is the tax professional a Chartered Tax Adviser?  

Chartered Tax Adviser (CTA) status means an individual is a practising member of the Chartered Institute of Taxation (CIOT) – the leading body in the UK for professionals dealing with all aspects of taxation. CTA status is highly regarded in the tax industry for the following reasons:

  • Exceptionally high standards required to qualify as a CTA (detailed technical examinations in tax combined with mandatory time-based practical experience in a tax facing role). 
  • The obligation to keep up to date with tax law relevant to your field(s) of work (CPD), which are spot checked by the CIOT.
  • The requirement to hold professional indemnity insurance at prescribed minimum values and scope to protect clients should the need arise.
  • The need to follow high expectations around ethics and conduct when practising in taxation – Professional Conduct in Relation to Taxation (PCRT).
  • Accountability to the CIOT who deal with complaints and administer disciplinary procedures and fines if a member is found to have not followed required protocols or behaviours.

Working with a CTA gives you assurance that the adviser has the relevant tax credentials and is regulated by a body relevant to tax advice.

2. Experience in R&D tax relief delivered with integrity and consistency

Who to work with comes down to personal choice, ideally made by the people in your company that the R&D adviser will collaborate with.

Specialist R&D tax advice can be obtained from large boutique agencies that process hundreds of claims per month, to smaller accountancy practices that might process 4-5 claims a year. 

Whilst larger firms might sensationalise the scale of their operations, dealing with a large number of claims does not necessarily make their staff “better” at supporting your business through the claims process. In the same way that dealing with a large volume of claims does not always expose those working on the claims to all complexities within tax legislation.  

A better credential is time-served experience working in this area – exposure to issues, a deep knowledge of tax legislation, crafting of methods to articulate information and approaches to portraying tax positions well in a claim report builds up and cements over the years. Someone with many years of experience in delivering R&D tax advice will be extremely capable in dealing with the nuances of this relief.

close up of two people discussing papers for a contract

Whomever you choose, the main thing is that your R&D adviser is present, diligent and takes the time to truly understand your projects within the context of your business. Because everything about the process and deliverable is extremely important to them too! 

This is what drives out comprehensive coverage of qualifying work and qualifying expenditure, which in turn maximises the value delivered by the tax incentive. A transactional exchange of outline bullet points and payroll data with a few hints and tips thrown in for good measure doesn’t really cut it!

3. Taking ownership of the process and content

It is important that HMRC receives good quality information to support your R&D claim. 

Knowing where to start and what to pull together can be overwhelming for staff or Founders. Getting the right people to focus on what they need to do is so much easier all round when the R&D adviser is the main point of contact, communicates directly with the various people in your business at the right time and only asks them what is relevant and necessary.

A credible and experienced R&D adviser will have the right knowledge around the intention and purpose of R&D tax legislation, HMRC interpretations of the rule base and familiarity with issues raised by HMRC. Taking ownership of information gathering, analysis and then drafting the content of the report is more efficient and effective if done by the R&D adviser to deal with the aspects that are important.  

Whilst it is never possible to guarantee that an enquiry can be avoided, assuring HMRC, demonstrating compliance and dealing with current issues to alleviate concerns helps to reduce the chances of an enquiry. This is where a good adviser will add immense value.

4. A team-oriented personality

Working alongside different staff within your business effectively is a huge part of an R&D advisor's role. To maximise an R&D claim, an R&D adviser should collaborate with the right people in the business, and this is never just one person. 

The process must involve your scientific or technical staff working on the development projects, your finance staff and for larger businesses your in-house tax staff, and your commercial staff/legal team.

5 employees at a desk with one of the female employees stood up with papers in her hands talking to the rest of the group who are sat down

A good R&D adviser will proactively seek out face to face collaborations and flex their approach to fit around people’s schedules, how well individuals grasp what is being asked of them, what information is available etc.  

A good adviser won’t be limited by pressures such as timesheets and profits in the job (recoveries) or lack of time/availability because of a heavy client portfolio. Such limitations hinder thorough exploration of information, evidence or positioning the tax matters well in the claim report.  

A good adviser will spend as much time as is necessary to speak with all of the departments to surface the full extent of qualifying work. They will be able to provide a single point of contact with continuity to ensure nothing gets lost in translation, and that relationships within your business and knowledge about your business builds year on year.

This is what creates the right environment to produce the best R&D claims; continuity brings a process that becomes familiar, efficient and enjoyable.

5. Transparent and fair pricing

Pricing does vary considerably these days for R&D tax advice. What’s right for your business will depend on what you need from an R&D adviser. Check very carefully the scope of work and what you will be expected to do – and ultimately, reflect on whether this genuinely represents good value.

work desk with papers and calculator on with employee holding papers

Some of the pricing models that on the surface are “cheaper”, are not always transparent when highlighting the value in terms of the true cost and/or the comparative scope of work offered. 

For example:

Low Fixed Fee Model

Take a model of a low fixed fee, say of £3k per claim – unless you know the value of your claim before you sign up, you cannot know whether this fee is as good as it seems. If the cash/tax benefit you receive is only £5k, then a £3k fee equates to 60% of this, which is unfairly excessive. If you claim annually and know this represents more like 15%-20% then that’s in keeping with the average price for full scope R&D services. If you are considering this option, ask the R&D adviser if they can gauge the potential value of your claim before you sign up.  

Low Percentage Fee

Low percentage fees of 5% appear to be exceptionally good value, for what may sound like a full scope service. However, watch for reverse engineering using portals and automated report generation software meaning effectively you are paying for a client DIY with review and guidance service. If that’s all you need then this works, but if you thought you were getting the content writing expertise of a tax professional, this could be disappointing. 

In our opinion, review based approaches are never as beneficial as a full scope service in the round in terms of error detection, enquiry readiness or maximising the value of a claim.  

Incremental Increases in Fees

Also, watch for incremental increases based on the value of your claim that you may not realise will apply until you have signed up and you start to calculate the value of the claim properly. Suddenly, the headline percentage may increase to a level equivalent to a full scope service that you are not receiving.

If you work with a good R&D adviser year on year or have a history of making R&D claims, they will be able to flex their scope and fee if this is appropriate for your circumstances.  Assisting a company with an R&D claim is not a one size fits all scoping/pricing model and different clients have different needs.  

Personally, I believe a contingent fee basis for an R&D adviser-led full scope (discuss, gather, prepare, defend) is best for most clients for the following reasons:

  • The percentage basis is clear – you can see how much of the cash/tax benefit you will be retaining or paying over. I never charge more than 20% because it’s important that your business retains the value.
  • The percentage basis means that year on year, whatever the final value of the cash/tax benefit, your business will keep the same percentage value. The adviser fee changes in line with your cash/tax benefit, keeping things fair and transparent.
  • It is possible to put a cap on the ultimate value of the fee, which I do on grounds of decency. For example, 20% of the cash/tax value, subject to a cap of £X. This means that once the claim value increases above the set cap, the effective fee percentage falls. 

We have seen instances where some advisers seek to charge more as the claim value increases – presumably because higher claim values are more likely to attract the attention of HMRC. By pricing fairly in the first place, there should be no need to charge more to cover everything required to help clients compile and document a robust R&D claim.

It is far better that there are no hidden costs and if there is an HMRC enquiry (something that can never be ruled out) then it gives peace of mind to know that your adviser will liaise with HMRC to resolve this as part of the scope of work for no additional fees. 

From an integrity standpoint, we like to know that if there is an enquiry, we have the opportunity to handle this for our clients.

6. Coordinates with your accountant

R&D tax relief is a part of the wider Corporation Tax Return. Compiling an R&D Tax Credits claim can be offered as a standalone specialist service and clients really should be liberated to choose who they work with in this regard.

Most accountants are receptive to specialist R&D advisers - subject to understanding our credibility - and a good adviser will take a joined-up approach to share information and support your accountant with effecting the R&D claim if necessary.

Some R&D advisers do have tax software to submit the R&D claim for you, separate from your accountant.

two males discussing papers over a coffee at the kitchen table

It is important that your accountant maintains full knowledge and control over any changes to your tax affairs.

When the R&D report is prepared, it is saved as a PDF document. This is provided to you and your accountant. Your accountant can see the figures that need to go in the Corporation Tax Return, and a good R&D adviser will double check these are as expected – working with your accountant.  

The PDF report is then attached to the electronic filing bundle with the company computation, Corporation Tax Return and Statutory Accounts by your accountant to submit to HMRC. From 1 April 2023, everything will need to be submitted digitally in this way, unless an exemption applies.

From 8th August 2023, an additional information form must be prepared and submitted to HMRC by your R&D advisor prior to the corporation tax return containing the R&D claim being submitted. Without first submitting this form, any R&D claim would be removed from the company tax return by HMRC.

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