5 key questions to consider
Whether you’re considering an accountant or an R&D claims specialist, this guide gives you the tools you need to evaluate any potential R&D tax credit advisor.
We’ve outlined 5 questions you should ask when choosing an advisor. For each, we’ll help you to understand all of the factors that contribute to success in that area.
There can be enormous disparities between providers in this area. In some cases, you can receive your funds in under a week. Sometimes it can take longer than 6 months.
Two factors affect the time it takes to receive the funds:
- How long it takes to create and submit the claim
- How long it takes to receive the money after the claim is submitted to HMRC.
Creating and submitting the claim
The rule of thumb here is that a claim shouldn’t take longer than a couple of weeks to create and submit. Some providers will gather claim data by interviewing your team over calls, lengthy email chains and spreadsheets; and this can quickly drain time from your team.
Cost data and technical narrative
The claim consists of two main elements: the cost data and the technical narratives. How quickly these sections are completed will depend on the provider. Accountants are well-placed to complete the cost data for your claim, but they will struggle with the technical narratives. If your advisor lacks expertise in your domain then more of the burden will fall on your tech team to complete the technical narrative or educate the advisor.
A good specialist advisor might have a relevant domain expert on their staff who will help with the technical narrative. If so, it will be faster than doing the claim yourself or via an accountant, but they will come at a high cost.
Co-ordinating the claim internally
Once your claim exceeds £100k of expenditure, or you claim for multiple R&D projects, then coordinating the claim internally can become time-consuming. If you are submitting a claim of this size, then ask your advisor about how they will help you to co-ordinate the claim.
Building a large claim requires input from multiple parties. Your advisors, accountants, subcontractors, finance, technical and product teams may all contribute. If your advisor does not have a robust system to co-ordinate these parties, then you may find yourself becoming the claim’s project manager!
We use an intelligent online platform to speed up the process of creating the claim. This ensures that your cost data is captured as fast as possible: either by importing your costs from Xero and your past claim, or by inviting your accountant to complete the cost data on your behalf.
For the technical narratives, our platform enables your technical team to capture the critical information in a way that is compliant and optimised with the scheme rules. We then use this information to build your narratives into the claim report and write up the overview of the claim.
This approach varies from traditional advisors who employ expensive domain experts to write the narratives by interviewing your team. However, such experts are very costly and in most cases drain more team time than doing the narratives using the EmpowerRD method. For example, both Charlie HR and Sen saved significant amounts of team time and money by switching away from this domain expert approach.
Our platform is also designed to improve the process of coordinating the claim. Each stakeholder in your business receives a login with customisable permissions. The coordinator can track the progress of the claim using the activity dashboard. This results in an efficient workflow for the business and complete transparency for the finance team. Read about how the platform improves claim coordination in our Cognism case study.
Receiving the funds
HMRC aim to payout funds within 28 days after a claim has been submitted. However, the average R&D tax credit repayment time in 2019 was 47 days.
Since the pandemic, HMRC have more consistently met their 28-day payout SLA. However, the SLA requires that 95% of claimants are sent their funds in 28 days, so we do still see some delayed claims.
There are two factors that can affect how quickly you receive the funds:
If you submit your claim through a respected advisor then HMRC are more likely to trust that the claim meets their standards. This is particularly important for first-time claimants where HMRC will not have a claim history for your company.
Most specialist advisors will provide this benefit, but this is something to consider if you choose a non-specialist accountant for your claim, or if you decide to submit the claim yourself.
To speed up the receipt of funds, you can also take out a short-term loan on your future credit. This is widely known as “R&D Advanced Funding”. This can either be against a future claim before you start the claim process, or it can be a loan at the point the claim is submitted (effectively skipping the wait time at HMRC).
Some providers will offer this service in addition to their claims service. The benefit of the loan being secured by the R&D tax credit advisor is that the due diligence process will be more efficient as they have a lot of the necessary information from your claim document. However, it is possible to acquire the loan using a separate third-party service provider and claim, for example, with your accountant. There are numerous providers out there such as RockingHorse and Finstock Capital.
Like many of the top R&D tax credit specialists, we maintain a high level of credibility with HMRC. We sit on HMRC’s R&D Consultative Committee, and are one of four trusted advisors setting industry standards with the Chartered Institute of Taxation. We also have a robust, standardised procedure for building our claims. This results in quick turnarounds for our claims once they’re submitted.
We also provide an integrated Advanced Funding service known as EmpowerRD Now. For an additional 5% of your credit, you can receive your funds as soon as your claim is submitted to HMRC. We also provide more extensive advanced funding options for those who wish to receive their funds up to 6 months before they submit their claim.
We proudly track how quickly it takes our clients to complete our process. Our fastest claimant completed their claim and received their funds in 6 days and 2 hours. Most of our claimants submit their claim in under a week.
When making a claim, there’s a delicate balance to strike between claiming too little and claiming too much. If you submit a claim for more than you are due, HMRC will open an enquiry into your claim and may even fine you.
However, as you only claim once a year, it can be difficult to know if you received less than you were eligible for. To help with that, here are three factors that affect the amount your advisor will claim for you:
At EmpowerRD, we charge a % fee so that we’re incentivised to maximise the amount you receive back from HMRC. If your R&D tax credit advisor is charging you a flat fee then they no longer have an incentive to maximise your claim. Instead, they are incentivised to keep your claim low, because that way HMRC are less likely to launch an enquiry.
Indeed, in all the cases where we’ve needed to retrospectively raise a client’s past claims, the provider had charged them a flat fee. A responsible R&D tax credit advisor will understand these dynamics and charge a % fee.
Experienced claims team
All claims have their quirks and intricacies. Having an experienced claims team ensures that those challenges do not result in you receiving back less than you are due.
There are a few ways to understand if the provider has an experienced claims team. You can, for example, ask for the profiles of the claims advisors working on your claim. You can also ask how many claims they have submitted in the past and whether they’ve submitted claims in your industry.
While claims can come from a multitude of industries, if you’re in one of the top-claiming industries such as tech or manufacturing, you should expect your R&D tax credit advisor to benchmark your claim against other claims from that industry.
This benchmarking should be done not only against the total value of your claim, but also for specific costs within your claim. For example, an advisor should know the proportion of subcontractor costs typically claimed for in your industry. Knowing this allows the advisor to avoid any red flags from HMRC while maximising the amount you’ll receive back.
We’re fortunate enough to have a talented and experienced claims team who have all the knowledge needed to get the most from our clients’ claims. Our team includes ex-HMRC inspectors and experienced R&D tax advisors who’ve submitted claims for businesses ranging from small startups to FTSE100 companies.
We always benchmark our claims against others within our portfolio. This helps our team ensure that they’re claiming the right amount and that the claim will be successful when submitted.
After experiencing our claims process, clients often request that we retrospectively review their past claims. We uncovered that Bloom&Wild’s previous provider had claimed 3 times less credit than they were due. This goes to show that even specialist advisors can get it dramatically wrong, so it’s always worth doing your due diligence.
An acceptable market rate for a claim is anything below 10% of your claim value. Anything above that unnecessarily exceeds the cost profile of making a claim.
There are numerous unscrupulous providers out there who will exploit the lack of market awareness of claimants and charge 15% or more. We’ve seen claimants pay as much as 40% for their claim.
Which services are you paying for?
When assessing prices between providers you’ll need to be clear about which services the provider is delivering. These questions will help you to understand which part of the claim your R&D advisor will manage:
- Will they identify your eligible R&D expenditure?
- Will they help you submit all the necessary cost information? Or will they only give you a spreadsheet to do it yourself?
- Will they allow your accountant to complete the cost information for you?
- Will they employ domain experts to write the technical narrative on your behalf?
- What other support will they provide for the technical narratives?
- Will they submit the claim for you?
- Will they defend an enquiry on your behalf at no extra cost?
- Will they provide you guidance throughout the year on changes to the scheme and claim value projections?
Providers often lead with an attractive headline price, but you may find that your team does the majority of the work on the claim. A responsible provider will be clear about which services they provide for their price.
Some claims are more complicated than others. For example, if you’ve received a grant for your R&D, then you may receive less credit back from your claim. Additionally, if your company has a complicated ownership structure then this could also affect how much you can claim.
In some cases, providers will advertise a headline rate only for the most basic of claims. However, as your claim progresses the costs will grow as the nature of your claim becomes clearer to the advisor. We strongly recommend ensuring that the price you agree upfront will be the price you finally pay. We have unfortunately seen numerous claimants adversely affected by this practice.
We’ve worked hard to build a process that is both cost-effective and transparent. By using an intelligent online claims platform, we are able to charge 5% or less for SME claims, and 10% for RDEC claims. Our price does not change in the case of an enquiry or any other complications.
What’s more, our team provides an end-to-end service. We ensure that you claim the full value of credit available to you, while minimising the impact on your team. Our R&D tax credit advisors help you identify all the relevant costs, work with your tech team to write the narratives, and calculate and submit your claim; all for our percentage price. In addition, we’ll handle any enquiries that come your way for no extra charge.
Unfortunately, there are some unscrupulous R&D tax credit advisors out there. Often they will bury the worst parts of their offering deep in the small print of their contracts. These are the three most important clauses to check for when looking over your contract.
Of all the things to avoid this is probably the most important. We see so many first-time claimants sign up to multiple-year contracts at high price rates, and sincerely regret it. Once you sign the contract, the provider no longer has an incentive to deliver a good service. In almost all cases the claimant will change provider after the lock-in period is over.
A responsible R&D tax credit advisor will have enough confidence in their service to allow you to move providers after your first claim. Do not accept anything less!
Sharing the claim report
Many providers will not allow you to view your own claim report. They might do this because they don’t want to expose the poor quality of their work, but it also affects your ability to move providers.
A previous claim report can be useful to a new provider. It allows them to see what you claimed for last year and therefore helps to maximise what you claim for this year.
In addition, it’s an important record to keep for your own tax purposes. It could be pivotal in a future enquiry on any of your tax matters with HMRC. A responsible R&D tax credit advisor will understand this and allow you to view and keep your claim report.
Defending an enquiry
This is another critical one to check in your contract. If your claim results in an enquiry, will the provider defend the enquiry? And will they do it at no extra cost?
Enquiries can take a long time to resolve. We’ve heard of enquiries taking over a year to resolve. As a result, providers can sometimes charge astronomical sums to help you through them – even when the enquiry came from a claim they submitted on your behalf!
Again, a responsible provider will assist your enquiry at no extra cost, understanding that the enquiry may well be due to their own error.
Simply put: we don’t do lock-in contracts, we always share your claim report, and we will always defend you in an enquiry at no extra charge.
While most providers will advertise high rates of success, this metric can hide other problems with their claim history. Here we help you to look through the headline figures and understand your provider’s true likelihood of success.
Strangely, there are better measures to understand the R&D advisor’s success, than their successful claim %. Even claims which result in enquiries, penalties or reductions can eventually be deemed “successful” under this metric.
It’s a good idea to ask your advisor how many times their claims have resulted in enquiries, penalties or credit reductions.
One of the most common reasons that claimants encounter problems is that their providers do not respond to the scheme’s rule changes. HMRC are constantly evolving the scheme to improve outcomes for businesses and reduce fraud. For example, on 1st April 2021 HMRC introduced a cap on claimants’ credit, limited by their PAYE liabilities.
Being on the wrong side of these rules changes can result in your claim being delayed or reduced.
References and testimonials
While most providers will provide case studies, it’s important to interrogate exactly what those case studies say about the provider’s process.
In addition, reviews on third-party websites like Trustpilot can help to give a more balanced view of the service. You can also ask the advisor to provide a reference client from your industry. All these are useful indicators that the provider has a successful track record.
We take great pride in our successful claim record. Fewer than 0.4% of our claims have resulted in an enquiry, and in none of those cases was the enquiry due to a problem with our R&D tax credit claim. In addition, none of our claims has been reduced or received a penalty.
As one of four trusted advisors sitting on HMRC’s R&D Consultative Committee, we have unique insight into the current and forthcoming changes to the scheme.
Beyond that, we aim to provide as much transparency as possible to our prospective clients. We publish numerous case studies, are listed on Trustpilot and can provide reference clients for you to discuss your claim with.
Guide to R&D advance funding
R&D Advance Funding can give you access to up to 80% of your future R&D tax credits up to 9 months before receiving the payment from HMRC.
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The complete guide to compiling and submitting an RDEC claim. Includes an explanation of the differences between the two schemes.
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The complete guide to compiling and submitting an R&D claim through the SME scheme. Including how it works, who is eligible, and how to apply for it.