Anyone connected to the world of R&D Tax Relief, be that companies who claim, accountants or third-party service providers won’t need reminding of the ongoing fallout from the ever-changing landscape in this space.
A recent development is the sudden closure of two well-known service providers and whilst we can only speculate as to why these firms have closed, it does highlight how the past and future changes are and will impact companies, from the perspective of both a service provider and service user.
This leads to the question “What should you be looking for?” from the organisation responsible for creating and submitting your claim. This is a question that can be difficult to understand in an industry/scheme that, from the outside, is difficult to understand.
Over the past 12 months I have had dozens (and dozens) of conversations on this very topic, so have set out below pieces of advice I’ve shared and an outline of the processes the firm I work for, RDS which is part of BSE - Business Support Experts group of companies, have in place to successfully navigate the R&D Tax Relief scheme:
Due Diligence:
An obvious one but what exactly do you need to look for? I would advise the following:
· Online reviews: Is there any information on one of the many online review platforms?
· Age of company: How long has this firm been established? Whilst length isn’t a guarantee of quality, it can help form a judgement.
· Size and experience of team: Get on LinkedIn and assess the backgrounds of the technical people; look for accounting/financial backgrounds and industry-specific experience such as STEM backgrounds. Do the same for the Directors.
· Connected Companies: Is the firm part of a wider, well-known firm. Do they have backing from a Private Equity firm for example?
· Fees: Whilst 5-10% can sound attractive, what exactly are you getting for that? Is that on qualifying spend or end benefit? Is this a one-man band working from home or a team of 10 ex-accountants in the city centre? What level of work will you, the client, need to do? What aftercare is on offer, and will you have to pay upfront or after?
RDS has been in this space since 2017, have over 1000 clients, and 20+ staff, and we are backed by BGF. The fees RDS offer reflect the market and, the fact our client's time is minimised, the claim is maximised, and we defend all submissions, we feel justified. There are firms out there charging more than us for their clients to do all the work. Justification of fees can be established by the following two points.
Establish the process:
What process does the provider offer? We’ve heard of instances whereby the client will be sent an Excel spreadsheet with certain questions and pointers to fill out. This can take weeks or months of the client’s time and without fully knowing HMRC's guidelines, could be completely inaccurate. The incumbent will then turn this into some form of report. In some instances, which HMRC have now changed, the client would see nothing beyond this until one day, the benefit would be sent to them via the 3rd party, who in the meantime, has submitted to HMRC, received the total benefit on behalf of the client and after removing their share, delivered to the client.
Whilst the receiving party part of the process should now be fixed, the qualification and creation part could still exist. You need to find out, as a minimum:
1. How will the project detail be qualified, defined and then recorded?
2. Will you see a copy of the report and financials before submission?
3. Who will submit the report?
4. Where will the benefit go?
RDS have a time-efficient service (typically 2-3 hours of our client’s time), an 8-stage quality control process, and full transparency on reports & financials with final sign-off complete by the client after review. Submission to HMRC by the client’s accountant, with the benefit going directly to the client.
Defence:
Before commencing with any firm, you need to establish exactly what they offer in terms of defence should HMRC decide they’d like to know more about the submission, which is now set to increase to 20% of all submissions. I’ve seen and heard of 3rd parties offering defence, of the claims they’ve created, for £250ph. Others offer nothing and will run for the hills if HMRC were to come knocking.
You need to ask what defence process they are offering or if you currently have a provider and don’t know, recommend you find out ASAP.
At RDS, we will never submit something we don’t feel is eligible and to stand by this, full end-to-end defence is included within our fees at no extra cost.
In closing, the fallout is still ongoing with no sign of letting up and the next 12 months will be just as interesting to observe.
Written by Chris Cunnane.
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