How to maximise your R&D Tax Credits claim
In our humble opinion there are still far too many SMEs not benefitting from the R&D Tax Credits scheme.
There are a myriad of reasons for this – ranging from a belief that the activities carried out do not constitute Research and Development to an illogical fear of raising their head above the parapet and capturing the attention of the taxman! (We have addressed these issues in a previous blog (view it here >>)
Once a company has acknowledged that R&D Tax Credits might be worth exploring and established eligibility they are faced with another decision – how to go about making a claim.
Take your pick...
When it comes to submitting your claim for R&D Tax Credits you essentially have three choices:-
- Do it yourself
- Let your accountant do it for you
- Utilise the services of a specialist R&D Tax Credits consultancy to prepare and submit the claim on your behalf.
We are probably a little biased on this point, but option c) would always be our recommended route and here's why.
In our experience the DIY approach always ends up leaving something on the table. No matter how diligent and competent your team, R&D Tax Credits is not your core function. You will know everything there is to know about manufacturing or engineering or software development, but how can you possibly know everything about a highly specialised area of tax?
When companies try to submit their own R&D Tax Credits they inevitably do not maximise the amount of money that they could actually claim; they struggle to meet the deadlines for submission as they have their "day job" to contend with and there is no reporting structure put in place to make future claims easier to process. We have one client who prepared a very good claim which would have meant a tax repayment of £30,000; after involving Fiscale, the claim was nearly doubled. There are other examples.
Delegate to your accountant
Option b) is generally preferable to the DIY approach, however we must reiterate that R&D Tax Credits is a very specialised area. It is unlike most other areas of accountancy and taxation in that it is less about tax and more about your R&D. The numbers is the easy bit, working out what is qualifying R&D and what constitutes a scientific or technological uncertainty are the challenging bits!
Most accountants are well aware of how to calculate R&D Tax Credits but are much less confident with deciding if the activities undertaken by the client are R&D.
Go for the specialist
The fact is, we work alongside many accountants because they realise that this is a niche area. Their clients can gain more benefit by using the services of specialist R&D Tax Credits advisors. We do not compete with accountants as we are not offering those standard accountancy services – all we do is R&D Tax Credits and Patent Box Relief.
One of the major differences between R&D Tax Credits submissions made by an accountant and a submission made by Fiscale often lies in the presentation of the information. Many Accountants will simply make changes to the tax computation, but not provide any information to HMRC, by way of explanation.
Why it pays to show your work
Do you remember being at school in a Maths lesson and the teacher droning on and on about the importance of showing how you arrived at your final answer? Well it would appear that R&D Tax Credit submissions are a bit like that too!
The Technical Team at Fiscale prides itself on the level of detail that goes into the Disclosure Report submitted to the R&D Unit at HM Customs & Revenue (HMRC). We believe that the key to our 100% success rate is the way we show, step by step, how we arrived at the final figure presented in the Disclosure Report.
The comprehensive nature of the report removes any guess work for HMRC, they can follow the thought process that we have worked through. This enables HMRC to query a specific element of the claim rather than throwing the whole claim out because they do not understand where the figures came from. Exposing the process allows any issues to be discussed and illustrates that we have applied due diligence. The detailed nature of the report allows us to present a convincing argument to HMRC as to why all the elements of the claim should be accepted.
The report also reduces either the possibility or quantum of any penalties they could charge as a result of any errors in the claim. HMRC can charge penalties if they find an error in a claim. The penalty can be up to a maximum equal to the tax under declared or the value of any losses that have been overstated which could be considerable. Our processes reduce this risk by disclosing every aspect of the claim which can help demonstrate that 'reasonable care' has been taken.
HMRC randomly samples R&D Tax Credit claims so, as with any other supplier in the industry, we have a number of enquiries each year and to date our approach has meant that no of our clients have ever been charged a penalty!
This process works, our 100% success rate and excellent relationship with the R&D Units at HMRC are a testament to this fact.
Once the Corporation Tax Return CT600 and Discovery Report are submitted to HMRC we deal with any queries on your behalf. It is a painless process!
From what we have seen many accountants will only submit the CT600 with the R&D Tax Credit claim outlined within the form. There is no detailed Disclosure Report - which means that HMRC cannot see the "workings out". Cast your mind back to that Maths teacher and remember those immortal words "If I can't see the workings it's all wrong" - when it comes to R&D Tax Credits the same principle can apply, increasing the chance that the whole claim will be rejected.
If you want to get the maximum amount possible back from your R&D Tax Credits claim use a specialist, use Fiscale. We show all our "workings out" and guarantee no shortcuts and top marks every time!
Want to find out more?
If you would like to find out more about R&D Tax Credits and how they could benefit your business please get in touch by calling 01440 708333 for a no obligation chat.