Selecting an Advisor
“It is clear that accountants and other professionals do not always provide accurate information about government support for R&D.”
HMRC Research Report 101 states: “It is clear that accountants and other professionals do not always provide accurate information about government support for R&D.” This leads to uncertainty amongst those applying for grants and making claims for R&D tax credits about what and when they may claim for.
It is not uncommon for companies to discover R&D tax credits, for example, only when they appoint new accountants.” Source: HM Revenue and Customs Research Report 101 – Qualitative research into businesses’ Research and Development (R&D) decision-making processes.
In recent years multiple firms have sprung up, offering R&D Tax Credit consultancy services. Some of these boutique firms are highly professional and employ experienced and highly qualified accounting/taxation and technical staff.
Unfortunately, many firms attracted by high fees have moved into the field without bringing the rigour and expertise that clients deserve from a professional services adviser.
Before appointing an adviser:
- Ensure the firm has experience filing claims
- Examine their record with HMRC (inquiries, adjustments & withdrawn claims)
- Avoid commission-only sales staff ‘guaranteeing’ a claim
- Insist on an experienced analyst in your industry
- Ensure you won’t be writing the claim yourself
- Do not accept a long-term contract
- Avoid penalty clauses for switching providers
- Ensure the firm is regulated by ICAEW / CIOT
- Avoid per diem and set-up fees
- Avoid additional tax return filing fees
- Look for Patent Box experience
- Ensure HMRC inquiry handling is not an additional cost
- Clarify the position on fees when no cash is generated
- Ensure that the firm can demonstrate experience of filing many successful claims in the specific area of science & technology you require.
- Beware of commission only sales staff guaranteeing you a claim, especially in the software field. You should speak to the technical analyst who will prepare your claim and have confidence in their integrity, professionalism and experience in your field to determine your eligibility to claim.
- Choose analysts experienced in claim preparation and the specific area of science and technology you require. Many firms employ sub contract / part-time analysts who have limited experience in claim preparation or in the field. You should speak with both the technical and financial analyst who will prepare your claim to ensure that they have the expertise necessary.
- Discuss the extent of time your own company staff will be involved in the process. An experienced advisor should conduct one meeting or telephone call, gain all relevant technical/project information, and prepare financial reports from supporting ledgers. Beware of firms asking for detailed documentation on the technical details of the project and/or expect you to prepare the financial source data for use in the claim.
- Avoid long lock-in contract periods. A twelve-month contract is sufficient for any adviser to prove their worth; they should seek to keep their client’s business due to excellent service rather than a contractual lock-in.
- Avoid penalty clauses for switching providers. Check the small print for penalty charges levied on termination of the contract.
- Ensure that your selected company can demonstrate regulation by a professional body – ideally the Chartered Institute of Taxation (CIOT) or Chartered Institute of Accountants of England and Wales (ICAEW) in respect of services, money laundering regulations, ethics, training, professional indemnity protection and have professional indemnity insurance in relation to the provision of accounting/taxation services.
- Ensure the adviser is experienced to handle any HMRC Inquiries raised and will do so without further cost.
- Avoid per diem and set-up fees. The industry norm is to take a % of your tax saving when you benefit from the saving. Some companies insist on payment in advance, deposits, set up fees, payment when a claim generates unutilised losses.
- Avoid additional Tax Return Filing Fees. Unregulated advisers subcontract this work to third-party accountants or back to your accountant, adding the possibility for information miscommunication, further costs to be recovered from you and potentially a question over whose professional indemnity applies. This can be avoided by using a regulated adviser who is able to complete the tax return to HMRC.
- If your company has or is likely to have patents and could benefit from the additional taxation saving from Patent Box, ensure that the advisor also has Patent Box experience. R&D expenditure timing can affect the decision of when is best to elect into the Patent Box scheme.