With increasing awareness of the government’s research and development (R&D) tax credit incentive, the number of companies intending to claim the incentive is set to double over that period. Great news for companies that want to innovate without the resource constraints that they often face.
Our complete report ‘A Nation of Innovators – a ForrestBrown report on business attitudes to research and development’ reveals many interesting insights and will hopefully be a useful tool for you. You can download your own personal copy here.
A nation of innovators
Our report has been put together following a comprehensive survey of 247 UK business leaders. It is the first of its kind in ten years and was commissioned to gauge business leaders’ appetite for innovation and identify any barriers that they feel stand in their way. From a business perspective, it is reassuring to hear that 89% of them said they planned to innovate in the next three years. That’s concrete proof that we really are a nation of innovators.
Barriers to innovation
On the flip side, many businesses face hurdles. In fact 68% of respondents said they faced barriers to innovation. For many, those barriers were due to lack of time, talent or short term thinking, but for 57%, the greatest barrier was lack of finances. If finance is the biggest factor preventing innovation, perhaps that brings us neatly to the question of ‘why aren’t more businesses making the most of the government’s R&D tax credit incentives?’
Understanding the ‘claim gap’
Despite almost nine in ten respondents stating they had plans to innovate in the next three years, only 40% of respondents said they intended to claim R&D tax credits. That represents a significant ‘claim gap’ which we need to address. However just as significant, is the fact that only 20% of respondents said their business had already made a tax credit claim. That shows we will be facing a big rise in the number of companies wishing to make a claim in the future. Accountants will need to be proactive in addressing R&D tax credits with their clients.
The really powerful news is that of the respondents who had experience of claiming R&D tax credits, they felt it had a really positive impact on their business. If we break down the statistics, 39% said they were able to directly increase R&D activity as a result, 47% hired new staff and 24% were able to reinvest the funds they received to boost their business. And to add to the positive picture, nearly half of all respondents who had received a tax credit said it was for a greater value than they were expecting.
How you can help: increasing awareness
As the report highlighted, there are a lot of misconceptions surrounding R&D tax credits. Accountants have an important role to play in helping their clients identify activity which may qualify for R&D tax credits. It is a fantastic way to add value to your clients by going beyond the numbers and having conversations with them about what they do, to see if their activity qualifies. More often than not, your client simply won’t have a clue that their demanding client project or bespoke technological solution to a business process could equate to a significant tax credit.
Submitting the very best claim
Once you have identified the R&D within a client’s business, how do you make sure the claim is optimised? Experience helps of course. We would advise analysing the costs thoroughly, taking into consideration what records are available to support the people costs and consumable costs which can be allocated to the project. Having a methodology that you can back up robustly is crucial. Finally, we recommend double-checking the claim to ensure nothing has been overlooked.
At ForrestBrown we specialise in R&D tax credits. Using a specialist makes sense because in our case R&D tax credits is all we do and so we are 100% focused on their cash generating potential. We’re used to working in partnership with accountants to complement their general practice and increase the value they deliver to their clients.
Everyone benefits; we share our fee with you, whilst the client gets the expertise of a firm voted ‘Best Independent Consultancy Firm’ at the prestigious 2016 Taxation Awards. Outsourcing the time consuming task of preparing the claim will free you up to work on your core service. If, as the report suggests, there will be a big increase in the numbers of businesses who wish to claim R&D tax credits over the next few years, then some support may be essential.
Don’t forget to download your copy of our A Nation of Innovators report. Sharing it with your clients could be a good way of raising the topic with them.
If you would like to talk to us about how we can work in partnership to bring the many benefits of R&D tax credits to your clients, as well as how we can support you, then please call the ForrestBrown team today on 0117 926 9022.
Bristol-based accountancy firm Evans & Partners has referred its clients’ R&D tax affairs to ForrestBrown since 2014.
We’ve been educating our clients as to the benefits of R&D tax credits for some time, but the wider picture is that awareness remains relatively low. However, in our experience, we’ve benefitted from being able to refer these cases to a specialist, which has helped with client retention due to the fact we can offer a fully-rounded service.
We don’t see using a specialist for this niche area of tax as a threat. Since it is all they do, specialists are 100% focused on the cash generating potential of R&D tax credits and so complement our general practice by delivering value to our clients.
The scheme’s impact on our clients’ business has been significant. For many, the tax credit has become a reliable income stream which clients build into their business planning, giving them the confidence to reinvest funds in further innovative R&D projects. Evans & Partners’ director Olly Evans