Effectively claiming R&D tax relief requires an up to date understanding of rules, guidance and working practices, making it something of a moving target. In many respects, tax policy is a living, breathing entity. Laws change, policies shift, interpretations progress.
An adviser skilled at adapting to (and leading) change can provide businesses with vital support in accessing incentives safely. Whether you are new to R&D tax relief or have claimed for many years, there are some key criteria a good R&D tax adviser should meet.
If your prospective or current adviser falls short, then it’s time to look elsewhere.
Eight considerations when choosing a new R&D tax credit adviser
1. Assess your potential adviser’s experience of the tax industry
R&D tax credits are a tax incentive – claimed via your company tax return and administered by HMRC. R&D tax advice, including any support with making an R&D claim, is tax advice. So a critical starting point for any R&D tax adviser is to ascertain the adviser’s tax qualifications and experience. Are they chartered tax advisers?
Chartered tax adviser status is nationally regarded as the gold standard tax qualification in the UK. ForrestBrown is a member firm of the Chartered Institute of Taxation (CIOT) and our 120 strong team includes a large team of qualified chartered tax advisers and chartered accountants.
This means that each of our clients can be sure that:
- They are dealing with appropriately qualified tax professionals who have sat and passed detailed technical examinations in tax,
- Our team undertake regular training to stay up to date on tax law and CPD records can be reviewed by CIOT at any time,
- We hold relevant professional indemnity insurance to protect our clients should something go wrong,
- We are subject to formal disciplinary procedures from CIOT to deal with complaints,
- Every member of our team adheres to a strict code of conduct (PCRT) informing our processes and professional behaviours,
- We will only provide advice when we are competent to do so, that we will deal with their affairs professionally and transparently and that we will explain clearly any risks associated with our advice.
Of course, nobody sets out to have a bad experience with their adviser, however, understanding the protections that come with professional body membership gives clients peace of mind.
Many branches of tax overlap and your R&D tax relief claim forms part of your company tax return. As a result, your R&D tax adviser needs to work transparently with your in-house tax or finance team, or your external accountant.
Are you confident they will be able to do this smoothly? It will be important that they can. It is very likely that your accountant will be a professional body member themselves, and subject to the same ethical code, since all of the major tax and accountancy bodies publish this code jointly.
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ForrestBrown have teamed up leading professional body, aat, to bring you a guide on What you should know before appointing an accountant or tax adviser.
2. How often do they handle R&D tax credits?
R&D tax relief is a policy area laden with complexity and even smaller businesses can easily fall foul of the detailed rules governing eligibility.
Whilst high volume agents can make clients feel part of a production line, agents who only deal with a small number of R&D claims alongside other services can miss insights into HMRC practices and updates to their processes.
Make sure your R&D tax adviser can demonstrate their credentials in this space, and that they will take time to understand the unique needs of your business. There is no one size fits all approach to R&D tax relief claims, nor will the same methodology be right every year. Expect your adviser to flex their scope of work to suit your needs, and to work with you proactively to identify value and manage risk.
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3. What industry experience do they have?
R&D tax relief advice requires a mixture of tax expertise and sector-specific insight. The incentive is governed by tax legislation, but deciding which projects qualify as R&D depends on the assessment of someone with relevant technical expertise.
To ensure that they can support you to accurately apply the definition of R&D to your business, check whether the advisers you choose employ industry experts that are capable of understanding and communicating the scientific and technological advances being sought.
Have those sector specialists worked in industry and how relevant is their experience to your business? How much access will you have to the adviser’s technical specialists?
If you work within a specialist space, the language is likely to get technical, so it helps if your adviser has people on their team who can follow the concepts discussed efficiently. This saves your technical team time and these specialists are a vital conduit between your innovation and HMRC.
4. What will your overall time investment be?
Different R&D tax credit advisers offer very different services. Some advisers will invest a lot of time themselves in understanding your business, preparing detailed reports to support your claim, and handling the submission process either directly or in partnership with your accountant.
This option takes the burden off your team. However, outsourcing your claim doesn’t outsource your risk, so it is important to understand how your adviser will deal with risk management.
Any documentation prepared on your behalf for filing with HMRC should be reviewed by you. A good adviser will make sure you understand your claim and enable you to complete this review efficiently.
Transparency is key, so any lack of it under the guise of saving you time should be a warning – it will be exposing you to risk and if HMRC review your claim, will end up costing you a lot more time overall.
Some advisers save themselves time by pushing more of the burden onto you. Services which require you to complete lengthy forms or templates may be cheaper at face value, but as with many things in life, there’s often a high cost attached to a low price.
By expecting you to take on the preparation, your adviser is less likely to spot errors or opportunities, leaving you less than confident that you’ll be receiving a fully maximised, robustly prepared R&D claim.
Ask yourself what your time is worth and consider which aspects of your R&D claim you would most like support with. Each case will be different, and the support you need may change over time, but what’s important is that you feel that it is time well spent.
5. What is the process that your adviser will follow?
Check out exactly what your prospective advisers will do for you. A comprehensive service should look something like this:
- Discovery and assessment – reviewing your business processes and records to determine whether it is appropriate for you to undertake an R&D tax relief claim.
- Information gathering and analysis – gathering your business records to support the preparation of your claim. This is likely to include a meeting or site visit with your team.
- Preparation of the claim documents – good practice includes the preparation of supporting documentation alongside your tax return and computation. This supporting documentation should be in a format suitable for HMRC.
- Review and approvals – R&D claims are complex and draw on different types of expertise. An inbuilt quality assurance process should ensure that the documentation you are asked to review is submission ready. Your adviser should then ensure you have sufficient information to approve the claim.
- Submission of the claim – this is usually an online submission and may be handled directly by your R&D tax adviser, or by your accountant. Either way, expect the two to work together on your behalf.
ForrestBrown’s process embeds quality assurance at each stage, drawing on expertise from our multidisciplinary team of chartered tax adviser and accountant, lawyers, sector specialists and former HMRC tax inspectors.
6. How about enquiries?
For most businesses, the next stage after submission will be receiving the benefit of the R&D tax relief claim. However, a proportion of claims submitted each year are selected by HMRC for further review.
In recent years, there’s been a increase in R&D tax relief enquiries. HMRC doesn’t publish its enquiry rate, but it recently added 100 new R&D tax staff. With 100 extra pairs of hands, HMRC potentially has the resources to cover upwards of 3,500 enquiries at a time.
Our claim methodology is designed to withstand the detailed scrutiny applied by HMRC during an enquiry, to ensure that they can be resolved to HMRC’s and our client’s satisfaction as quickly as possible.
Our advisory practice supports businesses with HMRC enquiries if they haven’t prepared their R&D claim with us. Through this work, we have seen many cases where enquiries uncover serious errors in claims. These can be complex and potentially costly to resolve, so always check if the quoted fee from an adviser includes enquiry support.
7. Compare the terms of engagement
This is another area where firms of R&D tax credit advisers can vary considerably. There are five questions you need to weigh up carefully:
- Scope of work – What’s the full scope of the adviser’s work?
- Fee calculation – How is the fee for R&D tax credit advice calculated?
- Contract term – Is it a multi-year R&D tax credit contract?
- Corporation Tax return – Who handles the Corporation Tax return?
- R&D enquiry support – What does your contract say about HMRC enquiry support?
The devil is always in the detail. Ultimately, you’re signing an agreement for intricate advisory which concerns your tax obligations. Due diligence on the terms of engagement is essential. Of particular concern is a separate charge for handling an enquiry. Enquiries can take long to resolve, and these fees can quickly rack up.
The same can be said of contracts with multi-year terms. This speaks to an adviser that’s unsure of its value. ForrestBrown only offers year to year, rolling agreements with our clients. We’re confident that our service speaks for itself. No clauses or fine print hijinks necessary.
8. How will the firm work with other stakeholders?
R&D tax relief claims hinge on relationships between different stakeholders to complete effectively. Have a think about whether the firms you are considering will work alongside key people in the process: your competent professional, an in-house tax team or individual, your other advisers, HMRC.
Our sector specialists can communicate with your specialist people on a peer-to-peer level. We also have ex-HMRC tax inspectors on our team to help ensure our approach will meet HMRC’s expectations.
We invest time in developing our processes so that we can work seamlessly with your accountant, sharing information, supporting them as appropriate and handling the R&D tax credit part of their wider work. No one is left out in the cold – and that creates robust R&D claims.
What do HMRC think about R&D tax credit advisers?
The agent strategy team (therefore, HMRC’s overall stance) is positive about the use of R&D tax advisers and specialists. This is primarily because they are reassured by membership of professional bodies such as The Chartered Institute of Taxation (CIOT), meaning an obligation to adhere to strict ethical guidelines.
HMRC’s R&D team broadly feel the same. Advisers save them time by knowing the rules and what information to present. They understandably expect R&D advisers to have a detailed understanding of the rules.
The importance of choosing the right R&D tax credit adviser
Whether you outsource your R&D advice or go it alone, the responsibility for the accuracy of your R&D claim lays with you. This means that choosing a reputable adviser is important.
It is worth taking the time to choose well, based on your appetite for risk, time available to get involved yourself, and who else will work on it within your business.