At ForrestBrown, we are passionate about research and development (R&D) tax credits. It’s what we do, day in day out. And we love partnering with accountants to deliver robust, maximised claims for their clients.
We know just how important client satisfaction and retention is for accountancy practices. Our aim is to enhance your relationships with your clients and add value through our unique expertise in R&D tax credits.
Our technical firepower, robust processes and record-keeping recommendations ensure that R&D tax relief delivers value for your clients. With that in mind, we want to help build your confidence in spotting your client’s R&D.
In this article, we help you identify R&D carried out by your existing clients, taking you through the eligibility criteria including what others often miss. We also offer practical advice on how to introduce the incentive to your clients when you haven’t done so before and outline how a partnership with ForrestBrown could help you deliver robust maximised claims.
How do I know if my clients are eligible for R&D tax credits?
Many of your clients may not be aware that they are eligible for R&D tax credits. Others may have incorrectly ruled themselves out or had another adviser tell them that their activities don’t qualify. This is the biggest obstacle for your client.
The HMRC definition of what counts as R&D is purposefully broad and for this reason, businesses sometimes struggle to identify with it. This is because R&D can be found in every single sector, and in all different types of businesses. Whatever their size or sector, if your client is creating new products, processes or services – or modifying existing ones – there is a good chance they could be carrying out R&D.
Which is where you come in, with our help. As an accountant, you will usually have access to all you need to determine which of your clients are eligible for R&D tax incentives.
Identifying R&D activities
The first step — and often the biggest challenge — is spotting qualifying R&D in your clients’ businesses. Being proactive around this can help protect your relationship. You want to avoid the situation where your client is approached directly by an R&D tax credit consultancy or your direct competitor about the benefits of making a claim.
When starting to prepare your clients’ accounts for a forthcoming year-end —or even after you’ve read this article — you should look at each client in your portfolio and ask yourself the following questions:
- Do they employ skilled or technical staff?
- Do they operate in a specialist or niche market?
- Do they work in a regulated market?
- Do they take on challenging projects that involve them taking a leap into the unknown?
- Have they taken on projects that have overrun, or that they’ve lost money on?
If the answer is ‘yes’ to any of these then there’s a good chance that they are carrying out qualifying activities.
In this instance, we can arrange a scoping call with your client if you wish. This is where we would proactively bring value to your clients by doing an R&D evaluation on your behalf. You are welcome to join us on this call if you’d like to. It would typically be a fifteen-minute call with the client to explore their eligibility further and provide an estimate of how much their claim might be worth.
We’ve created an R&D spot-check PDF that you can download for free. It provides a clear overview.
HMRC’s seismic shift
HMRC has recently become more risk-averse after it identified and prevented £300m of fraud linked to an R&D tax credit claim. As a result, there has been a seismic shift in their approach to R&D tax credits. Claims are receiving more scrutiny than ever before with particular attention being paid to qualifying costs. We understand that you need the confidence that your client’s claim is fully supported and can withstand HMRC scrutiny.
At ForrestBrown, our team is made up of chartered tax advisers, chartered accountants, sector specialists, lawyers, and ex-HMRC inspectors. We have robust processes led by HMRC policy insights to ensure all of your clients’ costs and activities are captured.
This results in a claim that is fully maximised and protected from risk. If HMRC do ask further questions about it, we will resolve these as part of our service. Our enquiry rate in 2018 was just 0.8%.
Common myths that exist around R&D tax relief
Unfortunately, R&D tax relief is an area where myth and misinformation has spread. These myths hold back businesses – and prevent accountants from proactively bringing this opportunity to their clients.
The following are some of the more common R&D myths:
“Everyday activities don’t qualify”
Your client may believe what they do as part of their ‘normal’ job couldn’t possibly qualify for R&D as it’s not ground-breaking.This may not be the case. Construction is a good example of this.
“You have to be a profitable business”
This is not the case; a loss-making company can claim R&D tax credits.
“It will take too much of my time”
At ForrestBrown, we work in a way that minimises your client’s time commitment.Our process is exceptionally proactive meaning your client should expect to input around a day’s worth of time in total from different departments.
“Projects need to be successful”
This is not the case; failed projects often show that advances were being sought, meeting the criteria for qualifying R&D.
“I can’t claim if I have received a grant”
in some circumstances your client will be able to claim for both R&D tax credits and grants – read Grants and R&D tax credits – how to use both.
“People won’t understand what we do – It’s too complex”
ForrestBrown employs sector specialists with industry R&D experience. Their purpose is to liaise with your client’s technical departments to get the information required.
“Subcontracted work cannot be claimed”
If your client has subcontracted R&D then they can still claim – read more on claiming relief on subcontracted R&D.
“R&D tax credits are risky – I will be fined or investigated by HMRC”
R&D tax credits are an established source of funding that have been around since 2000. HMRC is tasked to give this money to businesses as a reward for their investment in innovation.
How to present R&D tax credits to your clients
It is important that you introduce R&D tax credits to your clients in the right way. Some may be extremely sceptical; others may have been misinformed or even unaware of the incentive.
In this section, we provide practical advice about how to talk to your clients about the opportunity including the process, its benefits, and the investment from them.
Key areas to highlight for those new to R&D tax credits
Some accountant partners tell us it’s not always easy to bring R&D tax credits to a new client for the first time. Because R&D tax credits are all we do, we’ve put together some tips to help you do just this.
This we’ve split into three key areas to discuss with your client:
- Communicate the benefits of R&D tax credits
- Educate your client around R&D tax credits with information specific to their sector
- Ensure they know why they should work with an expert
Communicating the benefits of R&D tax credits
R&D tax credits were created by the government to encourage businesses to try new things, take risks and take on challenging new projects.
The benefits of R&D tax credits to highlight to clients are:
- Because a business can make a claim each year, R&D tax credits are a reliable form of business funding.
- They help to increase cashflow.
- Most importantly, the incentive helps to support future growth — a lot of businesses use the money they receive to hire new staff, buy new equipment and push their R&D even further.
- R&D tax credits are attractive to investors and can help to extend a business’s funding runway.
Making a claim doesn’t require much time investment and the rewards are significant.
Educating your client around R&D tax credits
It’s important to educate your client about R&D tax credits. You will already know what approach works well for your client. We can work with you to understand your client and tailor an approach to suit them. Or if it is more appropriate, we are happy to discuss them with you on a no-names basis.
If they like printed literature, we can provide it. We have a range of printed materials which clarify and illustrate the R&D in specific sectors. We’ve also created an R&D spot-check PDF that you can download for free. It provides a clear overview, but if you are in any doubt, we are happy to follow up with a call.
Our website is designed to be informative and provide for those with varying degrees of understanding, from basic to advanced. We have our KnowledgeBank; our news section and case studies. A good place to start is our R&D tax credits explained page.
Our monthly newsletter R&D Bites is a rich resource for accountants: it not only provides examples of R&D, but also gives you access to educational webinars. To receive our next edition, you can subscribe here.
At ForrestBrown, in 2018 alone, we helped deliver over £100m in benefit to our clients.
We understand your relationship with your client is everything; that you would be extremely risk averse when it comes to introducing an external party. We’re the same. We love our clients – they are why we do what we do – and we wouldn’t put our relationship with them at risk for anything.
With ForrestBrown, we want you to have complete confidence in our team and the quality of our service. We are diligent with clients, giving each all the time it takes and a multi-disciplinary team of professionals.
You can trust us unreservedly; we have the credibility and authority. We are regulated by the Chartered Institute of Taxation. We were named ‘best independent consultancy firm’ at the Taxation Awards 2018 in recognition of our technical excellence and service innovation. Our team includes chartered tax advisers, chartered accountants, lawyers and industry specialists. Our robust methodology has built-in quality assurance that maximises your client’s R&D tax credit claim while protecting them from risk.
Working with ForrestBrown
We are already working with more than 500 accountancy practices and we like to develop true partnerships with them. The partnership is a way of us helping you to add value to your clients.
We’re happy to be flexible about how we work with your firm, based on whether or not you’re already preparing R&D tax credit claims. Some accountants like to prepare some claims themselves and refer us the more complicated ones.
That might be how we start a relationship with your accountancy practice, with a first client. We will use that to demonstrate our market-leading approach and our superior client service. However we begin working together, we always respect client relationships and deliver exceptional service.
Our relationship with HMRC
As the largest specialist R&D tax credit consultancy in the UK, you benefit from our policy-level insight and good working relationship with HMRC. We have two former HMRC inspectors and hold a seat on HMRC’s R&D Consultative Committee.
There has been a significant shift recently in HMRC’s approach to R&D tax credits with a rigorous focus on quality submissions. When you partner with ForrestBrown you will be protected from risk – we thoroughly understand the changes having helped HMRC define them.
Points of contact
We give you a dedicated point of contact with whom you can discuss opportunities for your clients. That point of contact will usually come and visit you at your offices to find out more about your business.
This visit will clarify how we can help you and your team. We will also update you about what’s going on with HMRC and the latest sector trends. It is a collaborative relationship.
Contact time can be as little or as much as wanted. We’re happy to take the strain to identify which of your clients would qualify. We can do this on a “no-names” basis. If you want to be involved more rather than less, that’s fine too.
As well as the dedicated point of contact, we make an investment in the relationship, which includes making resources available to aid wider understanding. Monthly accountants’ newsletters and sector webinars share our expertise. They provide practical and transferrable advice that accountancy practices can take away and implement. We hold events for accountants at which to share knowledge too.
If it’s appropriate, a relationship manager from our client relations team will be appointed to update you on the progress of your clients’ claims.
What to expect
We value our accountant relationships to which we dedicate unrivalled specialist technical firepower. Your point of contact will always be someone very senior. Most of the time that means a director but at minimum it would be a Chartered Tax Adviser who has proven themselves accomplished and diligent.
Following a referral, we will take time to understand your client’s business and uncover the full extent of their R&D. Our approach is rigorous and has a quality assurance process built in. The result is an R&D tax credit claim that is considered, fully maximised and protected from risk.
All we ask of you is to share some financial information about their costs – with your client’s approval – of course. More information about working with us can be found on our accountant partnership programme page.
Contact ForrestBrown today
We can say with complete faith that you and your clients will benefit from the specialist technical expertise of our award-winning team. We have an unrivalled understanding of the R&D tax landscape and that’s why more than 500 accountants have already chosen to partner with us.
To find out more about the benefits of partnering with ForrestBrown, contact me, Jennifer Eastman, senior tax manager, on: firstname.lastname@example.org.