Switching R&D tax provider

With additional complexity around R&D tax relief, rising provider fees and a potential dip in the quality of service you receive from them, some businesses are considering switching their R&D adviser. Despite valid reasons for moving, many businesses are put off by perceived risks. This article provides key considerations on switching adviser and the process, as well as criteria for weighing up risk and reward. 

When it comes to your R&D tax adviser, it is tempting to look only at the top-level claim value and accept the status quo. However, at a time when securing the relief and protecting your reputation are of paramount importance, it’s important to dig a little deeper and interrogate.

Most decisions on whether to switch adviser will be based on an assessment of the quality of service and value you currently receive. Herein lies one of the biggest challenges: how can you accurately judge what ‘good’ service looks like?

Read our article: “What does ‘good’ R&D service look like?”

Reasons to consider switching

There are plenty of legitimate reasons to consider moving R&D adviser. It can be a flashpoint, such as an error or a lack of technical understanding around recent changes to the incentive, or a slow erosion of confidence in their abilities. 

Sometimes, it relates to due diligence: a standard budgetary review of all suppliers and an assessment of the quality and value they provide. Often it is triggered by a change of personnel – someone leaves, someone new joins, responsibilities shift.

Here is an overview of some of the reasons businesses consider switching R&D provider:

• Reducing claim value – Seeing a decline in R&D claim value is often enough for businesses to investigate.  
• Increased costs – At a time when every penny counts, rising costs can trigger an assessment of your current R&D adviser. With the incentive’s value reduced, money must be well spent on a robust and high-quality service with meaningful impact.
• Questioning technical ability – In the face of unprecedented change to the incentive and increased complexity, your supplier needs to navigate the technical landscape with confidence and be all over the details. If you spot inaccuracies or signs of confusion, then your trust will be undermined. The PAYE cap is just one area where we see errors.
• Dip in service / poor customer experience – It’s not just businesses that have been impacted by the reduced value of the incentive; advisers are feeling the pinch too. Some may have made internal cuts that have reduced the level of service and proactive support you receive.
• Limited or no sector knowledge – For R&D tax claims, it is increasingly valuable to have a supplier with technical industry knowledge. They can talk the same language as your competent professional and understand the true nature of the R&D, making it easier to communicate it to HMRC.
• Lack of proactivity – Being proactive and spotting opportunities is so important to a good relationship – it is that positive energy and commitment to help you grow that is truly valuable. Accessing innovation funding is critical to growth and having a proactive adviser that can support you with other incentives such as grant opportunities, is vital. At ForrestBrown, we ensure that eligibility for incentives and reliefs is proactively managed as part of a wider view on supporting innovation throughout the life cycle. Using multiple suppliers for grants, Patent Box and capital allowances is inefficient and lacks a holistic approach. There’s also the risk that they’re not explored at all. 
• Enquiries – Although HMRC enquiries can be random and not triggered by a non-compliant claim, they can call into question your supplier’s ability to resolve them. At ForrestBrown, we often support businesses that have either claimed themselves or through another provider, to resolve their enquiry. As a result, the range of enquiries we deal with, through a variety of different mechanisms, perfectly positions us to help resolve an enquiry, should HMRC open one. It’s not just the confidence that we can resolve an enquiry either, but the fact that we proactively take learnings from each enquiry to better understand HMRC’s requirements. This then feeds into our wider approach to R&D claims.
• Outgrown – It may be that you were a different business when you engaged your current provider. If you’ve received funding and scaled from a start-up, you may simply have outgrown your provider and need a skillset and level of ambition that they can’t provide.

Moving from an accountant

It may be that your current R&D adviser is your accountant or wider professional services partner. They may be offering other services, such as accounting or auditing, as well as tax support. When it comes to R&D tax relief claims, it can make sense to work with a specialist R&D adviser for the following reasons:

• Cost – You may find the R&D work isn’t contingency-based due to your relationship with your accountant and the other services they’re providing. This can mean you’re simply paying too much for what you get. There is a misconception that R&D tax specialists are expensive.
• Technical knowledge – Many accountants don’t have the resources or time to maintain internal technical knowledge of R&D tax relief, especially following the legislative changes. R&D tax relief is often an area to seek specialist support due to the level of technical expertise required. 
• Sector specialism / knowledge – To get the most from R&D tax relief, you need to understand the R&D that’s being carried out and the technical detail. This allows you to discuss projects with competent professionals in their language and translate it for HMRC. 

Accountants rarely have sector expertise in-house. This may place a burden on your technical teams to get it right themselves or use their valuable time communicating it to a non-specialist. ForrestBrown has invested in sector specialists with industry experience for this exact reason – they are more efficient, more accurate at defining project boundaries and produce more robust claims. See diary of a technical specialist, Robin Taylor.

Moving from a dedicated R&D provider

Dedicated R&D providers will often present a contingency pricing model and potentially offer some specialist industry experience. But not all R&D providers deliver the best level of service or take a future-focussed approach to innovation incentives.   

At ForrestBrown, our dedicated team works with your finance and project teams to:

• Better embed processes and methodologies – a more sustainable and longer term approach. If key people leave the business, new hires can quickly get up to speed and understand the requirements and processes in place. 
• Focus on team engagement, knowledge sharing and upskilling, to ensure that all eligible R&D activities and costs are captured.
• Review your eligibility for other innovation incentives and reliefs. Adopting a holistic approach to innovation incentives means that you’re unlocking the full potential of your R&D.

It’s important that any adviser you contract with has the relevant tax qualifications and experience. Ask yourself: does the team hold professional qualifications, such as ATT or CTA? Are they members of a professional body? For example, we are members of the Chartered Institute of Taxation (CIOT) and adhere to its PCRT Guidance for R&D providers.

Key considerations when switching

There are perceived risks and genuine risks when it comes to moving providers. Here is an exploration of both, alongside the benefits of moving:

Risks

• Time and effort to onboard another supplier – Upskilling a new adviser on your people, operations and the nature of your innovation can take time. ForrestBrown mitigates this by assembling the right people, and providing clarity around what happens and when.
• Timings – Your year-end and the status of your claim can be key to determining at what point you should move providers. It may feel like there’s never a good time to move, so speak to our experts and we can advise you based on your situation.
• Will it be different / better? – The concept of better the devil you know is a dangerous adage. There are risks to your business associated with sticking with the same supplier if you feel things aren’t quite right. It’s important however to do your due diligence and speak to potential new suppliers, interrogating them on the areas that matter. Look into their credentials. As a minimum you should expect a high number of tax-qualified advisers, a broad mix of real-world industry expertise, demonstrable credentials in securing incentives and reliefs and for the adviser to be members of the CIOT (or similar).

Benefits

• Unlock value – Confidence that all qualifying activity and costs are accurately captured and rewarded. 
• A tailored, long-term solution – Take a step back from the R&D claim cycle to ensure that your R&D tax and innovation funding strategies are aligned to your business needs.
• Better sector knowledge / experience of your industry – ForrestBrown only hire sector specialists with real-life industry experience and the ability to speak to your team and competent professionals on a peer-to-peer basis.
• Faster / more efficient service – Our multi-skilled team work collaboratively, supported by secure systems, data and analysis to help streamline workflows and optimise insights and efficiences.
• Better level of service – See our content on good R&D tax service.
• Risk mitigation – A deep and up-to-date understanding of R&D best practice and how to apply it, ensuring that your claim is optimised, yet robust. 
• Access to expertise – An expert team of industry-experienced technical specialists, skilled in manufacturing, life sciences and digital & technologies and confident in understanding your R&D and translating it for HMRC.
• Better processes – From R&D record-keeping to project planning, we keep on top of your key deadlines and milestones. This gives you the confidence that your claim is progressing smoothly.
• Restructure for increased future benefit – If you’ve recently changed how you do business, including the use of subcontractors, we will advise you on how that might impact your claim.
• Re-engage key teams and stakeholders – With more engagement and focus from relevant team members, you are likely to see the impact of your R&D claim spread wider.

How to switch

These are the basic steps you will need to take to switch R&D tax adviser:

• Review contract – you first need to understand if you can move. Some contracts will feature lock-in clauses. If you’re a larger company that’s gone out to tender, you may have a long-term contract. Involve your legal and procurement teams to understand the terms and what they mean in practice.
• Speak to potential new providers – take the time to understand more about how they will work with you, the value they add and their experience. There are some key questions you can ask potential new suppliers along with more general considerations in our article.
• Plan – find an appropriate time to switch that makes sense for your wider business and current claim status. Our experts can help you understand some of the key considerations here. Our R&D tax deadline tool helps you understand the most important dates in relation to your claim.

How ForrestBrown manages the transition

At ForrestBrown, we talk to you and understand your concerns and immediate and future needs. We’re not going to be pushy, but we will review key information and assess your current situation and advise on recommended next steps. 

ForrestBrown offer tailored solutions. We look at your projects and understand when to feed in to have maximum impact. We don’t want to simply lift and shift an existing end-to-end R&D claim process from your old provider to a new one. We are not here simply to ‘do an R&D claim’. ForrestBrown wants to build your internal capability, and set you up for the future with efficiency and impact in mind. 

Here is how ForrestBrown handles the transition:

• Outline next steps
• Ensure continuity
• Detail our flexible solutions and consultancy options 
• There’s no hard sell, but we take a holistic approach to your innovation funding
• Build a team around your needs

You can then expect the following:

• ForrestBrown to quickly identify:
  • Who’s defining the R&D? 
  • Who’s allocating costs?

• Meet the team / run re-education sessions.
• Gather information – we make this process as seamless as possible using technology, with data protection and confidentiality baked in. We’ll also ensure we understand your accounting systems and make contact with your accountancy firm.
• Record key information as we go.
• A solution that is repeatable and sustainable.
• Upskill your internal tax team – again, with sustainable long-term results in mind, we work closely with your tax team to bridge knowledge gaps and improve understanding of technical areas of the incentive. 

Holistic approach to innovation incentives

We have a holistic approach, meaning that we’re able to assess your eligibility for other innovation incentives and reliefs, such as grants, Patent Box and capital allowances. This may have far more impact on your business than R&D tax relief in isolation. 

If your business is developing new ideas, solving technological challenges, or investing in plant or infrastructure, we help you leverage available incentives to accelerate growth, support strategic objectives and unlock opportunity.