Randall & Payne provide insight into R&D tax relief having achieved total savings of £5 million for clients.
In the latest UK200Group blog post, James Geary, Head of Corporate Tax for Randall and Payne, looks at the ins and outs of R&D tax relief.
It is a fact of life that all businesses need to innovate to remain competitive. Innovating necessarily involves investment of money into personnel and materials which often does not reward the business until the medium to long term. R&D Tax Relief exists to help companies to fund the cost of investing in new products, services and processes.
For many years there has been a prevalent myth that this relief only applies to white coat scientists in laboratories - the application of this relief is so much broader than that.
Many business owners tell us ‘this isn’t R&D, it’s just what we do’. For directors running their businesses, it is easy for them to assume that the work they carry out on a daily basis is just routine and what others in their industry are doing. The likelihood is that they, like other business owners, are using their own knowledge and experience to develop new things and while the initial approach taken by similar businesses might be the same, the ideas conceived will typically be unique to the business and the results will be very different. Even changes to a business’ own internal IT systems might qualify for relief.
James Geary joined the Randall & Payne team nearly three years ago, and his experience in this valuable relief has enabled him to work on around 80 companies to date, most of which can continue to claim on an annual basis, and in total savings of nearly £5 million have been achieved in that time. Probably less than half of these claims relate to development of specific products, the remainder are built around the kind of bespoke development (most commonly, but not exclusively, in the fields of IT and digital marketing) referred to above. This approach to claims is accepted and approved by the HMRC R&D units, who are issuing tax credit payments typically within around three weeks of submission.
Some of the below applicable sectors may surprise you, and we work with businesses in these sectors that benefit from R&D Tax Relief on a recurring annual basis:
• Software and web development
• Digital marketing and lead generation
• Financial services
• Food and drink
• Electronics and control systems
• LED lighting
• Product design
• Ecological and environmental service
• Fire & Security
• Ecological consultancies
We handle R&D claims by working with our clients to gain an understanding of the business and then adapting our approach to one that works best for each client and their workflow. We understand that our clients are busy, and that time spent away from the day to day activities of the business needs to be minimised. Initially, many of our clients believe the process is going to be difficult and lengthy, however, once engaged and their first claim has been approved, we often get told what an easy process we have made it for them. This is evident by the number of clients who are now referring other companies to us to assist them.
Where a claim is possible, we usually work on a success fee arrangement for the first claim (usually two years together), so the client only pays if HMRC accept the claim. However a small number of clients are not comfortable with this so we do not force this approach and will quote a fixed fee if they prefer, although most clients like the idea of having no financial risk in the process. To date, we have a 100% success rate so our clients can be assured that we will only work with them if we are confident that we can substantiate a claim. Going forwards, annual claims are usually made on a fixed-fee arrangement which is quoted in advance so our clients always know where they stand.
A number of our R&D clients have another accountant at the time of engaging us and would prefer to maintain their existing relationship. We are happy to work alongside their existing accountant in order to provide the benefits of R&D Tax Credits with no disruption to the usual compliance cycle, and indeed many other small firms have been impressed with the way we keep them informed, and have come to view us as an extension to what they do rather than in competition. A small number of local firms are now coming to a referral arrangement with us, where they will refer their clients to us on the basis that we will not “poach” the compliance work which is within their skill set, and they also benefit from a slice of the fee. This is a much more collaborative way of working and has helped these firms to see Randall & Payne as partners rather than competitors.
It is perhaps surprising how few small to medium sized firms do not have R&D Tax Relief amongst their offered services. James is always happy to share his experience with other members who are interested so please do contact him if you would like to know more about the way we provide the service to our regional marketplace.
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