Insight

Handling the requirements to access R&D tax relief

Bring in the right tax knowledge to ensure you are getting things right when it comes to preparing an R&D tax relief claim.

More and more companies expect the tax credentials of advisers in R&D tax relief to match their own industry expertise to properly support them with making applications for R&D tax credits.

Even if your company operates in an industry where the eligibility of your work is highly unlikely to be called into question, such as with biotech, medtech, Life Sciences etc. you still need to bring in tax knowledge to ensure you are getting things right.

Expertise cuts through complexity

The below Venn diagram depicts the reach and intricacies of the rule base around accessing R&D tax credits. You can see that the role of your in-house competent professional to qualify project work (the advance and uncertainties), relatively speaking, is only part of what is needed.

The criteria that need to be considered when putting together an claim is pretty extensive! It shouldn't surprise you then, that to put an R&D tax claim together requires a tight collaboration between your R&D tax adviser and the right people in your company.

Don't be put off by the complexities illustrated in the Venn diagram though. When you understand what you are doing and why, the process becomes much more manageable.

If you are a company that is eligible to claim funding via this tax relief year on year, things definitely get easier as your familiarity of the requirements grows.

Companies engaging with R&D tax advisers expect and rely on their own industry leading scientific or technological expertise being matched by the tax knowledge and expertise of the person they work with to prepare their R&D claim. In theory, bringing in the right tax credentials to match your industry credentials is a collaboration that, on paper, should work really well!

An efficient process is essential

The funding delivered via this tax relief shouldn't be ignored due to time constraints and difficulties in understanding the tax aspects.

The great thing about R&D tax relief is that unlike grant applications, for R&D tax relief claims, if you meet the requirements and demonstrate this in your supporting claim report, you will be provided with the funding.

For new start ups in the Life Sciences space in particular, you're already stretched, busy working both in and on the business - no doubt on a steep learning curve to establish business acumen, and looking to attract investment and support to grow your concept.

An adviser being able to both take away any sense of overwhelm whilst being efficient with your time is appreciated.

Integrity and tax compliance

Founders need an adviser that is completely above board and helps calculate a full but fair claim. The key for start ups in the Life Sciences space in particular is that the cash funds are paid to you promptly, seeking to mitigate the chance of an HMRC compliance check as far as possible (NB, it is not possible to guarantee that HMRC will not choose to ask questions about an R&D claim).

This will be achieved from getting things right and portraying all relevant information in a neatly packaged, comprehensive supporting claim report that is easy for HMRC to navigate and understand.

A unique adviser relationship

The process will require a time investment, but it should never feel overwhelming. An R&D adviser can guide you through and help you implement what is required.

Investing in a good R&D adviser is worth doing, and companies do not need to feel that they cannot afford the good advisers. Because this relief is about accessing cash funding, the consultancy service is paid for out of the additional funds received. And no ... we're not talking about success/contingent or no win/no fee charging bases!

Regardless of the charging basis, it's about the fact that if your company genuinely qualifies for this tax relief, the service provider's fees are not a sunk cost - they are recovered through the additional funding their service helps you apply for. Funds that you would not have had if you had not accessed this tax relief.

There are differences in scopes of work when it comes to supporting companies with making R&D tax relief claims. In our experience, the best results are achieved when the R&D tax adviser undertakes a full scope of work and actively manages all aspects of the claim preparation process.

The benefits of this approach are compounded when an R&D adviser and client choose to work together year on year - building a "co-worker" type of relationship with key points of contact in the business.

Knowledge of who does what, where data/info will come from and experience of what is required enables a process to evolve that's unique to a client's business and this creates efficiencies through familiarity.

Long standing relationships should never become transactional in nature. An R&D adviser should always approach each new claim period with the same diligence as their first time working with a company.

The main concerns to be addressed when choosing an adviser are:

Focus

The value of an R&D claim, no matter what the size of the business, will be diluted if the process is "bothersome" to those it touches within a company. Aligning the tax-based teaching and preparatory direction with company processes is a must.

Consistency

It can be exasperating should inefficiencies arise due to changes in approach to the preparation process year on year. Lost momentum or dwindling adviser enthusiasm are cited by clients we now work with as reasons they changed advisers - to ensure they can access the same calibre of adviser year on year.

Getting the expertise you signed up for

Frustrations can arise if the implied expertise invested in on sign up is not delivered by those doing the work (Tax Partner v Junior as a stark example). Issues arise too when hiring "expertise by association" with a brand/firm, when it's the person who delivers the service that truly brings the difference. Being able to a) choose who to work with and b) work with the same team members year on year, brings familiarity and a more rewarding/enjoyable relationship.

Why choose Fortus

We provide specialist tax advice on the UK's R&D Tax Relief Incentive Schemes. We focus on exploring with you whether opportunities to benefit from this transformative tax relief are present and help you access them.

Seeking confidence in eligibility assessments, we collaborate with the right people in your business to demonstrate how business endeavours fit with the requirements. Providing deep expertise around the intricacies of the tax rule base, we maximise value with ethics and integrity; partnering with you to provide relevant and meaningful tax advice from initial exploration to completion of a supporting R&D claim report for HMRC.

We'll build your knowledge and understanding of the requirements to get the best possible reward for your time investment.

This independent tax advisory service is one of our core businesses and compliments mainstream tax compliance services whether you take these from us or another accountancy practice.