Whether you make regular R&D claims or you’re new to the process, now more than ever R&D advisers and consultants are calling out for your attention – many by offering cheap rates for dubious services. And while we appreciate that the low rates may seem appealing, when it comes to R&D claims: cheap rarely means cheerful.
In late 2020, HMRC enacted a tougher stance for those taxpayers that were known to have overclaimed tax relief through their R&D claims. The well-publicised imprisonment of three taxpayers that sought to fraudulently claim £29.5M in tax credits is one such example of the steps HMRC is willing to take in order to crack down on those abusing the scheme. It has never been more important that businesses are receiving accurate advice.
R&D tax relief is a form of State Aid and as administrators of this, HMRC has a duty to check that claims meet the criteria set out in the legislation and guidelines. With the sector being only partially regulated, recent years – further exasperated by the Covid-19 pandemic – have seen an onslaught of unqualified advisers giving out misleading information in order to exploit these valuable innovation incentives.
In addition, unregulated advisers do not have to follow proper AML and GDPR processes which also protect the client. R&D claim preparation is a technically-demanding process, and potentially damaging to a business when not producing the correct analysis of expenditure or supporting records. This poor claim quality means you expose yourself to a much greater risk of errors, enquiries, and penalties from HMRC.
Putting your faith in the right team of technically competent R&D professionals will ensure you properly identify and justify all eligible R&D projects to get the maximum reward for your work.
What fees to expect
It’s fair to say that the phrase ‘get what you pay for’ is likely to apply to R&D service providers. When choosing an R&D adviser, it pays to be aware that most fees will be success-based (this is an unfortunate parallel with the ‘no-win-no-fee’ pricing model often seen on daytime TV adverts). These fees typically range from 5%-25% of the total claim amount. The percentage can often be the first indication of the quality and coverage of the service you are likely to receive, with less at stake for companies charging lower fees.
The breadth of the work (and what your adviser will do in the event of an HMRC enquiry) is a crucial consideration. That doesn’t mean you should go for the most expensive option, but checking the fees in relation to the scope of work allows you to properly evaluate the service (including how much of your time may be required) and, therefore, value for money.
The most respected R&D advisers will always want to offer value. On the higher end of the pricing scale, rates can be an honest and competitive reflection of what an adviser does. They should be putting the same diligence, rigour, and consistency into each claim. And this should be apparent in a strong commitment to client service, investing in a highly skilled team of engineers, sector specialists, chartered tax advisers, and R&D specialists with knowledge that cannot be easily matched elsewhere. Upholding this commitment does not come cheap, but both company and client benefit from the outcome.
There will always be sacrifices that can be made in order to become that ‘cheap’ R&D consultancy, be it through client service or in the technical capabilities of the person/s handling your claim. Whilst low rates are an easy way to attract clients and create traction in a crowded marketplace, the potential loss from a sub-par claim submission, or relying on heavy input from your technical team when their time could be better spent on other projects, is a significant trade-off.
What to look for in an R&D tax-credit consultant
To help you make a safe decision, we’ve outlined the minimum acceptable criteria that any R&D consultancy should be able to meet. Before you enter into any agreement, ask yourself:
- Are they regulated advisers? How will they protect you and your information?
- Do they know (and have regular training) on the government’s R&D legislation? Are they able to explain how – and to what extent – your work aligns with the legislation?
- Do they take the time to speak to your technical staff, understand your business, and the shape and nature of your R&D? Will they visit your business in person (or, at the very least, speak with your team via video conference)?
- Do they prepare a technical narrative to represent some of your key R&D projects?
- Do they have staff with specialist, sector-specific expertise?
- Can they offer testimonials from previous clients?
- Do they ask you to prepare your own technical documentation or send generic templates and questionnaires?
- Do they report back to you on their calculations and discussions, sending claim documentation for your approval before submission?
- Do they have a quality assurance process?
- Does their fee include enquiry support if HMRC have further questions about the claim or conduct a spot-check?
Any R&D adviser or consultant should be able to answer all of these points in the affirmative. If they can’t, then it’s best to look elsewhere.
Going above and beyond
Remember, what matters most is the adviser’s commitment to the robustness of your claim. You should always check with the adviser to see what’s included in the scope of the work, as well as ascertaining how much input will be required on your part, and the ways in which you’ll be supported in the event of an enquiry from HMRC.
Enquires, whilst rare for the most prominent advisers, typically result in your tax credit/repayment being delayed, giving inspectors time to better understand the submission and aligned costs. Whilst a daunting process, support during this time is crucial to answering complex questions that help align your claim with the vast nuances of the government guidelines. Whilst many advisers brag about their ‘100% claim success rate’ this does not clarify if the full claim amount was successfully achieved, or if they had to succumb to a lower rebate due to unvalidated remarks in their application.
Putting your faith in the right team of technically competent R&D professionals will ensure you get the maximum amount owed.