We recommend using an accountant or self-filing your claim if you’ve spent less than £50,000 on research & development in the past financial year. The government publishes a short guide for small companies to self-file here.
Before reaching £50,000 of costs, the R&D credit report is significantly easier to compile, and HMRC tends to apply less scrutiny on claims of that size. That means that you are less likely to receive a full enquiry, or be fined, for any errors in the claim. In addition, you’re less likely to have missed qualifying costs that would increase your claim size.
However, once you cross the £50,000 threshold we strongly recommend making a claim with an experienced R&D specialist. Primarily this is because the specialist will better be able to identify the correct costs to claim against, will speed up the process of compiling the claim and ensure that your claim is successful without any deductions, fines or enquiries from HMRC.
Partnering with your accountant and EmpowerRD
Once your costs exceed £50,000 it may make sense to work with both your accountant and EmpowerRD. Our platform allows accountants to work in partnership with our team and your business on the claim report. Most typically, accountants will provide the R&D costs, which is one part of the overall claims process.
To enable this collaboration, the claim co-ordinator can identify a user as the company accountant. The company accountant can then contribute cost data into the claim platform securely. Additionally, many clients may want their accountant to submit the claim on their behalf, which we support. Although, we can also do this for you at no extra cost.
Common limitations to accountants claiming R&D tax credits
One of the most common reasons that businesses start to use EmpowerRD for their R&D claim is that they feel they have outgrown the expertise and capacity of their accountants. This becomes clear in four typical ways:
Firstly, building an R&D claim report with an accountant will be an inefficient use of your team’s time. While the accountant may be able to efficiently detail the costs of the claim, they will not be able to write the technical narratives. As a result, your tech team will need to do this work without much guidance from the accountant. This drains a lot of time, and writing reports is never a popular task. Engineers prefer to do R&D rather than report on R&D!
Secondly, accountants are more likely to make errors which generate enquiries or fines. Indeed, most of the errors we see in old claim reports are in client-written or accountant-written reports. While HMRC doesn’t have the resources to scrutinise every claim in detail (so you may not have received an enquiry yet), your claim is more likely to be scrutinised once your credit amount increases. Additionally, in the Auditor General’s report into HMRC’s management practices, he has asked that HMRC significantly increase its oversight of R&D claims to combat erroneous and fraudulent claims. As of 2021, they have hired more than 100 new full-time staff to help with this effort. As a result, we expect to see more enquiries into poorly crafted claims, so it’s more important than ever to ensure your reports are well drafted.
Thirdly, accountants may miss out on legislative changes which could increase the success or value of your claim. Accountants provide counsel and support across a wide variety of financial disciplines. And with the pace of change ever increasing, it’s inevitable that they cannot be experts in each of the fields that they operate in. This is particularly the case for R&D claims, as the legislation changes frequently requiring new approaches to claiming each time. At EmpowerRD, we sit on HMRC’s own R&D Consultative Committee, helping to set the standards for the scheme across the industry. We also include ex-HMRC R&D claims inspectors on our team. As a result, you can be sure that we’re completely up to date with the legislation, which in turn ensures your claim is successful and its value is maximised.
Lastly, accountants may take a long time to create the report. Both because the accountant has a number of other urgent responsibilities, but also because compiling the report without the help of technology can be a long and arduous process. At EmpowerRD our platform speeds up the process of compiling a claim so that it typically takes a day or two to build out the report. This contrasts with the timelines we hear from accountants which can be many months before the claim is completed. If speed and the resultant cashflow are important to your business, then it makes most sense to use EmpowerRD.