The idea of fully automating R&D tax relief claims can be appealing. Who doesn’t want more time back to deal with the day-to-day tasks of running a business? Before deciding to use a fully automated platform, it’s worth making sure you fully understand the pros and cons of this approach. In making a decision, you should consider your business’s profile and risk appetite and ensure you’re up to date on HMRC’s focus on compliance.
Keeping up to date with the latest R&D tax changes can be challenging. We’re in the middle of the biggest ever shake-up of R&D tax relief. The introduction of a merged scheme for accounting periods beginning on or after 1 April 2024 follows hard on the heels of the introduction of an Additional Information Form the previous August.
Add increased compliance activity (including more than 500 compliance officers) from HMRC into the mix, and it’s understandable that companies are reviewing their approach to R&D tax relief. The extra resources and expertise required to meet new mandatory requirements are causing companies to rethink if and how they claim.
Against this backdrop, the prospect of reducing the time required to prepare a claim can be tempting. However, businesses should keep the bigger picture in mind when considering using a fully automated platform to generate their R&D tax relief claim. Scrutiny of claims is at an all-time high so now is not the time for taking shortcuts.
What are automated platforms and claim portals?
Before discussing the pros and cons of automated platforms, it’s worth defining our terms. Some advisers play fast and loose with the terminology they use to describe technology. For many, R&D tax claim platform and R&D tax credits portal are used interchangeably but can mean different things to different people.
Strictly speaking, a portal implies a solution for secure file-sharing and collaboration – both important factors when working with clients to prepare R&D claims. However, some portals are more sophisticated than others. For example, additional functionality could include the ability to assign users with different levels of access to confidential payroll information.
Five questions to ask about an automated approach to R&D tax relief
1. Whose time is saved?
Time-saving is marketed as a major benefit of fully automated platforms. But it’s worth checking whose time is being saved. CFOs and finance directors may see a reduction in the time their teams spend on R&D claims but this is often at the expense of technical colleagues. This comes with an opportunity cost which should be factored into the decision to procure a fully automated platform for R&D tax relief.
2. How is R&D identified?
Helping the company’s competent professionals understand what is and isn’t R&D is an essential part of an R&D tax relief adviser’s service. Updates to the Department for Science, Innovation and Technology (DSIT) guidelines on the definition of R&D for tax purposes, and recently published Guidelines for Compliance (GfC3) have made HMRC’s expectations clearer. If you’re not aware of what’s changed your claim risks being flawed from the very start, and this is where talking to an expert adviser could be helpful.
3. How are project boundaries defined?
Syncing your systems to capture time and costs relating to R&D can bring efficiencies. But this does come with the danger that project boundaries become blurred, leaving claims open to challenge further down the line.
Companies often make the mistake of drawing project boundaries too wide to encompass the entirety of a commercial project, rather than the specific element in which R&D has taken place. If internal systems are not sophisticated enough to make this distinction, fully automated platforms will simply be importing this flaw into your R&D tax relief claim.
4. Is the importance of project descriptions overlooked?
Since the introduction of the Additional Information Form, providing detailed project descriptions has become more important than ever. Projects can be very complex, making it difficult to extract the relevant details as clearly as possible for a non-technical audience – but this is vital at a time when HMRC is on high alert for error and fraud.
5. What are the technical qualifications of the team?
Despite aiming to fully automate R&D tax relief claims, platforms often come with the caveat that a claims manager will oversee your claim. If you’re considering the merits of a platform you should also assess the strength and depth of the support team the claims manager can call on if required. From a tax perspective, ACA or CTA qualifications are a good indicator. For industry specialists, look for relevant degrees (and postgraduate studies) as well as hands-on experience in your field.
Expert advice tailored to your business
Our team provide your business with specialist advice, not a one-size-fits-all approach. We’re here to support you with best-in-class tax advice to help navigate the new requirements for R&D tax relief claims.
ForrestBrown’s approach
The introduction of an Additional Information Form as a mandatory requirement has effectively introduced a template for R&D claim submissions. We’ve adapted our approach to ensure the information we prepare is tailored to fit this new format.
However, the big difference is that we provide expert input at every stage, from identifying your R&D to drafting your project descriptions. We understand your team’s time is precious, so we’ll design processes that help them record R&D in real-time, cutting down the time required when it comes to preparing a claim.
We use proprietary technology to support our expert team, enabling us to work securely and collaboratively with you. But this never comes at the expense of access to advice and insight from our advisers. With R&D tax claims under the microscope, now is not the time to sacrifice access to expert advice. An adviser-led approach will save time and costs in the long run.